:fG 


The  Illinois  Central  Case 

In  the  Supreme  Court  of  Illinois 


December  17,  1909 


ILUKOIS  PRINTING  COMPAMV 
DAimUA,  ILUNOI3 


Oral  Argument 
W.H.  Stead 

Attorney  General 


The  Illinois  Central  Case 

In  the  Supreme   Court  of  Illinois 


Oral  Argument 

of 

W.  H.  Stead 

Attorney  General 


December  17,  1909 


ILLINOIS  PRINTING  COMPANY 
DANVILLE,  ILLINOIS 


2- 


^ 


CONTENTS 

\s^      Accounts — Magnitude  of 15 

>^      Accounts  Erroneous  and  Dishonest 24-  25 

?      Analysis  of  Bill 16-82 

•••V.   Averments  Sufficient  to  Impeach  Account  and  State- 
ments   25-29 

Bill  Amended — Reasons  for 2-     3 

Bridge  Arbitraries 35-44 

Commencement  of  Suit.  . 1-     2 

^        Controversy  Should  End 4-     5 

4       Charter  Analyzed 5-  11 

Charter  a  Contract 11-  12 

N       Charter  Obligations 12-  13 

^      Charter  Lines 18-19 

K      Cairo  Bridge 29-33 

V      Claims  Abandoned 63-  64 

(N^.t      Cairo  and  Mounds 81-82 

^      Dual  Capacity  of  Company 22-  23 

.      Duty  Under  Sections  18  and  22 23 

Dubuque  Bridge ZZ-  35 

Dishonest  Schemes  of  Division 58—  63 

Draying  and  Switching  Charges 64 

Diversion  of  Traffic 73-74 

Expansion  of  System 20-  23 

Express  Earnings 64-  67 

Eating  Houses  and  Dining  Cars 74-  77 

Fiduciar}'  Relation 13-  15 

Failure  to  Assess  Tax 23-  24 

Free  Use  of  Charter  Line  Property 68-  74 

^      General  Averments 82 

Hauls  on  Defendant's  System 55-  58 

i*      Illinois  Central  System .  18-  20 

^\     Interest  on  Deposits 78-  79 

Interstate  Commerce  Question 1 18-126 

^     Joint  Earnings 44-  64 

Land  Grant 7-     9 

Mobile  and  Ohio  Rentals 44 


880870 


Mileage  Basis  Legal  Rule 45-  47 

Mileage  Basis 'Recognized  by  Defendant 48-  49 

Mileage  Basis — No  Reason  For  Not  Applying 49-  51 

Methods  of  Division  Not  Shown  in  Semi-Annual  State- 
ments    51-  53 

MileageBasis  Applies  in  Absence  Special  Circumstances.  53-  54 

Non-Charter  Lines 17-  18 

Newspaper  Advertising 67-  68 

Relation  of^Parties 5-  15 

Rules  of  Pleading  Applicable 16 

Rate  Cases  Not  in  Point 54-  55 

Rentals  from  Other  Roads 77-  78 

Rebates 79-80 

Stated  Accounts 82-102 

State  Tax  Question 102-1 18 

Stough's  Opinion,  Judge 3-     4 


The  State  of  Illinois 

V. 

The  Illinois  Central 
Railroad  Company. 

May  it  please  the  Court: 


Oral  Argument  of 

W.  H.  Stead, 

Attorney  General. 


PRELIMINARY. 

This  is  a  suit  brought  by  the  State  of  Illinois  against  the 
Illinois  Central  Railroad  Company  to  compel  an  accounting 
from  the  year  1877  to  the  present  time.  The  original  bill  was 
filed  in  this  court  to  the  January  term,  1907. 

Our  theory  was  that  the  per  centum  required  to  be  paid  into 
the  state  treasury  under  defendant's  charter  constituted  revenue, 
within  the  meaning  of  section  2  of  article  VI  of  the  constitution, 
and  therefore  this  court  had  original  jurisdiction  of  this  suit. 

A  motion  was  made  by  defendant  to  dismiss  the  suit  for 
want  of  jurisdiction.  Its  contention  was  that  the  word  revenue, 
as  used  in  section  2  of  article  VI,  meant  taxes  and  nothing  more; 
that  the  moneys  required  to  be  paid  into  the  state  treasury, 
under  defendant's  charter,  were  in  no  sense  taxes,  but  payments 
voluntarily  agreed  to  be  made  on  a  contract  with  the  state,  in 
consideration  of  rights,  privileges  and  franchises  granted  by  the 
state. 

We  took  no  issue  with  defendant's  counsel  as  to  the  character 
of  these  payments.  What  they  said  then  was  right  then  and  is 
right  now.  Our  contention  was  that  the  term  "revenue,"  as 
used  in  section  2  of  article  VI,  meant  more  than  taxes;  that  it 
embraced  all  the  annual  or  current  income  collected  by  the  state 
for  public  use,  whether  produced  by  taxation  or  growing  out  of 
contract. 

At  the  April  term  of  this  court,  1907,  defendant's  motion  to 
dismiss  was  allowed,  and  leave  was  given  the  state  to  withdraw 
its  bill  without  prejudice.  The  bill  was  thereupon  filed  in  the 
circuit  court  of  La  Salle  county,  to  the  June  term,  1907. 

The  defendant  challenged  the  right  of  the  attorney  general 
to  bring  the  suit,  and  entered  a  motion  to  dismiss.  Afterwards 
this  motion  was  withdrawn,  and  defendant  was  given  until  July 

(1) 


8,  1907,  to  file  its  demurrer,  and  the  hearing  thereon  was  set 
for  October  7,  1907. 

The  demurrer  to  the  original  bill  was  argued  by  Judge  Dick- 
inson and  Mr.  Horton  for  nearly  three  days.  It  is  unneces- 
sary to  say  they  made  able  arguments,  because  neither  of  these 
gentlemen  make  any  other  kind.  The  mental  equipment  and 
legal  attainments  of  Judge  Dickinson  have  been  recognized  by 
the  nation — and  we  in  Illinois  are  proud  of  it,  and  proud  of  him. 
While  Mr.  Horton 's  abilities  are  not  so  widely  known,  they  are 
every  whit  as  great.  I  will  not  say  there  is  no  abler  lawyer,  but 
I  will  say  I  have  never  met  him. 

While  the  original  bill  was  carefully  prepared  and  set  up  all 
the  facts  as  we  then  knew  them,  at  the  time  it  was  filed  the  in- 
vestigation had  only  begun.  I  am  safe  in  saying  that  none  of  us 
then  fully  appreciated  the  magnitude  of  this  lawsuit. 

During  the  period  which  elapsed  between  the  filing  of  the 
original  bill  and  the  argument  of  the  demurrer — some  eight 
months — accountants  were  at  work  upon  the  company's  books. 
New  and  important  facts  were  discovered.  Schemes  for  the 
division  of  joint  earnings,  practices  between  the  charter  and  the 
non-charter  lines,  and  methods  of  accounting,  unknown  to  us 
when  the  original  bill  was  drawn,  were  from  time  to  time  dis- 
closed. 

While  the  arguments  made  by  Judge  Dickinson  and  Mr. 
Horton  did  not  convince  us  the  original  bill  was  bad,  they  did 
convince  us  the  thing  to  do  was  to  amend  the  bill  and  disclose 
fully  all  the  relations  between  the  company  and  the  State  and 
between  the  charter  and  the  non-charter  lines,  and  set  out  in 
the  amendment  each  and  every  of  the  state's  claims,  with  all 
the  particularity  and  detail  possible,  in  the  light  of  the  facts  as 
we  then  knew  them,  in  order  that  the  principles  of  law  appli- 
cable to  the  charter  relations  of  the  Illinois  Central  Railroad 
Company,  and  which  must  ultimately  control  the  accounting 
sought,  might  be  fairly  raised  by  a  demurrer  to  the  bill. 

For  this  reason  we  asked  leave  to  amend  the  original  bill — 
and  leave  was  granted.  Instead  of  amending  the  original  bill, 
we  prepared  and  filed  an  entirely  new  bill.  No  objection  was 
made  on  this  account. 

The  new  or  amended  bill,  which  will  hereafter  be  called  the 
bill,  was  filed  April  6,  1908.  Including  the  interrogatories  and 
exhibits,  it  comprises  352  printed  pages.  Six  months  were 
required  in  its  preparation. 


The  demurrers  were  filed  August  6,  1908.  They  consist  of 
a  general  and  special  demurrer  to  the  bill  as  a  whole,  and  twenty- 
eight  separate  demurrers,  both  general  and  special,  to  different 
parts  of  the  bill.  They  raise  every  conceivable  objection,  both 
as  to  substance  and  to  form.  These  demurrers  comprise  110 
printed  pages,  and  four  months  were  required  in  their  prepar- 
ation. 

The  time  consumed  in  preparing  this  bill  and  the  demurrers 
thereto,  in  view  of  the  multitude  and  importance  of  the  questions 
involved,  was  not  unreasonable.  And  I  take  this  opportunity 
of  saying  there  has  been  no  desire  nor  attempt  upon  either  side 
to  delay  this  lawsuit. 


JUDGE  STOUGH'S  DECISION. 

The  demurrers  were  argued  before  Judge  Stough.  The 
arguments  began  November  18,  and  ended  December  16,  1908, 
occupying  almost  an  entire  month.  On  the  very  day  the 
arguments  closed,  Judge  Stough  entered  upon  the  trial  of  an 
important  suit,  in  La  Salle  County,  which  lasted  for  over  two 
months.  Immediately  thereafter  he  held  the  March  term 
of  court  in  his  own  county.  The  result  was  that  the  arguments 
made  upon  the  demurrers,  to  a  great  extent,  passed  out  of  his 
mind.  They  had  to  be  read  over  and  the  authorities  reviewed. 
The  magnitude  of  this  task  will  be  appreciated  by  the  statement 
that  the  transcript  of  the  arguments  alone  covers  2,500  typewrit- 
ten pages. 

On  June  16,  1909,  the  demurrers  were  sustained.  Judge 
Stough,  in  his  opinion,  among  other  things,  said: 

"I  think  some  of  the  claims  of  the  state  are  good,  some  are 
doubtful  and  some  are  bad ;  but  an  error  on  my  part  concerning 
any  one  of  them  would  occasion  a  reversal  of  all  that  the  master 
in  chancery  and  I  might  do  for  the  next  couple  of  years  and  result 
in  only  a  waste  of  time,  labor  and  expense.  Before  this  court 
embarks  upon  an  accounting  that  will  occupy  years  of  time  and 
before  the  enormous  expense  that  would  be  incident  thereto  has 
been  incurred,  it  is  for  the  welfare  of  the  state  and  to  the  interest 
of  the  defendant  that  the  opinion  of  the  supreme  court  be  had 
upon  the  maze  of  questions  presented  by  this  bill. 

"The  charter  relation  of  the  Illinois  Central  Railroad  Com- 
pany to  the  State  of  Illinois  has  been  a  point  of  public  contention 
for  the  past  half  century.     During  a  part  of  that  time  the  matter 


has  received  the  attention  of  poHtical  parties,  and  forty  years  ago 
it  was  made  the  subject  of  a  provision  in  the  state  constitution. 
In  view  of  the  history  of  this  controversy,  it  is  a  piece  of  folly  for 
anyone  to  even  hope  that  the  report  of  an  accountant  appointed 
by  me  can  quiet  or  put  to  rest  this  litigation.  Why,  therefore, 
should  I  waste  both  the  money  and  time  of  the  parties  by  a  refer- 
ence of  this  cause  to  the  master? 

"This  is  the  third  bill  prepared  and  filed  by  the  state,  and 
after  having  listened  to  arguments  on  the  demurrer  for  five  weeks, 
by  several  of  the  foremost  lawyers  of  the  state,  it  does  not  appear 
wherein  the  present  bill  of  complaint  can  be  improved  by  further 
amendment.  I  will,  therefore,  without  seeking  any  excuse  for 
so  doing,  assist  counsel  in  accomplishing  that  which  they  failed 
to  accomplish  when  they  filed  their  first  bill  in  the  supreme  court, 
and  by  this  course,  I  am  sure,  the  best  interests  of  both  the  state 
and  the  defendant  will  be  conserved." 

I  am  confident  that  I  voice  the  sentiments  of  counsel  upon 
both  sides  when  I  endorse  and  commend  the  courageous  and 
intelligent  action  of  Judge  Stough.  If  it  has  no  precedent. 
neither  has  this  lawsuit. 


CONTROVERSY  SHOULD  END. 

To  enter  upon  an  accoimting,  covering  a  period  of  thirty 
years,  and  involving  claims  which  aggregate  millions,  before 
the  questions  of  law  are  settled  and  the  bases  of  accounting 
ultimately  fixed,  would  be  as  senseless  and  vain  as  to  undertake 
to  sail  the  seas  without  a  compass  and  without  a  chart. 

The  interests  of  the  state  and  defendant  alike  demand  that 
defendant's  charter,  in  all  of  its  mooted  features,  be  now  construed; 
that  the  rights  and  duties  of  the  State  of  Illinois  and  the 
Illinois  Central  Railroad  Company  be  now  clearly  defined,  and 
the  questions  of  law  pertinent  to  this  controversy  and  applicable 
to  the  accounting  sought  be  now  settled  and  for  all  time. 

If  the  Illinois  Central,  under  its  charter,  owes  the  state  money, 
it  ought  to  pay  it.  If  it  does  not,  the  state  should  cease  claiming 
it.  It  is  due  to  both  sides  that  this  question  be  now  settled  and 
this  controversy  be  now  ended. 

Each  and  every  of  the  state's  claims  are  set  up  in  this  bill 
with  all  the  particularity  and  detail  possible.  The  bill,  of  course, 
is  not  perfect.  In  phraseology  it  might  be  improved.  But,  in 
our  opinion,  the  case  set  up  in  this  bill  is  the  state's  case,  and  all 


of  its  case.  And  if  a  case  is  not  made  by  this  bill,  the  State  of 
Illinois  has  no  case. 

The  demurrer  to  the  bill  as  a  whole,  and  the  demurrers  to 
the  different  parts  of  the  bill  (which  the  court  below  sustained) 
raise  every  conceivable  question  of  law  which  affects  the  rela- 
tions between  these  parties.  In  this  case,  as  in  every  other, 
there  are  a  few  big  questions  of  controlling  importance.  But  I 
respectfully  submit  that  the  interests  of  the  people,  the  security 
of  this  defendant  and  the  welfare  of  the  future  alike  demand, 
not  only  that  the  big  questions  of  law  involved  in  this  case  be 
here  and  now  settled,  but  the  questions  of  lesser  importance  as 
well. 

Acting,  as  I  believe,  in  the  interests  of  the  people,  and 
prompted  solely  by  a  desire  to  do  my  full  duty,  I  earnestly  ask 
that  each  and  every  question  of  law,  presented  by  this  bill  or 
raised  by  these  demurrers,  be  fully  and  finally  determined  by  the 
decision  of  this  court;  that  the  opinion  in  this  case  be  so  sweep- 
ing and  broad  that  there  be  no  room  for  this  controversey  to 
live ;  and  that  from  this  time  on  the  meaning  of  this  charter  and 
the  rights  and  duties  created  by  it  shall  rest,  not  in  the  opinions 
of  governors  nor  railroad  officials  nor  hired  accountants  nor 
legislative  committees,  but  in  the  judgment  of  this  court — a 
tribunal  created  by  the  constitution  as  the  state's  final  arbiter 
of  property  rights,  to  whose  decrees  the  citizen  bows,  in  whose 
wisdom  he  feels  secure  and  of  whose  integrity  he  has  never  had  a 
doubt.  'i  .  i 

THE  RELATION  OF  THE  PARTIES. 

One  of  the  principal  objections  urged  to  this  bill  is  that  it 
does  not  state  facts  with  sufficient  particularity;  that  its  aver- 
ments are  general  and  amount  in  law  to  mere  opinion  and  con- 
clusion. This  objection  is  stated  and  restated  and  reiterated 
and  then  stated  again. 

Whether  or  not  a  bill  is  good — whether  it  avers  sufficient 
facts  or  the  facts  are  averred  with  sufficient  particularity — 
depends  upon  circumstances.  One  of  the  circumstances  is  the 
relation  of  the  parties.  If  they  stand  at  arm's  length,  one  rule 
of  pleading  applies.  If  they  do  not  stand  at  arm's  length, 
another  rule  of  pleading  applies.  There  is  no  fixed  rule  which 
applies  in  both  cases. 

At  the  very  outset,  therefore,  the  question  to  be  determined 
is,  what  rule  of  pleading  as  to  particularity  in  averment  applies 


to  this  bill?  And  since,  in  the  determination  of  this  question, 
the  relation  of  the  parties  is  the  essential  and  controlling  element 
— the  very  sine  qua  non — the  first  proposition  to  be  considered 
is,  what  are  the  relations  between  the  State  of  Illinois  and  the 
Illinois  Central  Railroad  Company? 

The  discussion  of  this  question  requires  a  brief  review  of 
some  of  the  early  railway  legislation  of  this  state,  the  various 
land  grants  made  by  congress  and  the  state,  and  a  careful 
analysis  of  defendant's  charter. 

In  1837  an  act  was  passed  by  the  legislature  of  this  state  for 
a  general  system  of  internal  improvements.  The  act,  among 
other  things,  created  a  board  of  commissioners  of  public  works, 
authorized  the  construction  of  a  railroad  from  Cairo  to  La  Salle, 
and  appropriated  three  and  a  half  million  dollars  in  aid  thereof. 
(Laws  1837,  p.  121.)  It  is  a  matter  of  history  that  the  state, 
after  acquiring  and  surveying  a  right  of  way  and  spending  large 
sums  of  money,  under  this  act,  abandoned  the  work. 

In  1843  an  act  was  passed,  incorporating  the  Great  Western 
Railway  Company,  and  authorizing  it  to  build  a  railroad  from 
Cairo  to  La  Salle  and  thence  to  Galena.  The  act  granted  the 
company  all  the  right  of  way,  lands  and  property  acquired  by 
the  Internal  Improvement  Commission,  to  be  appraised  and 
paid  for  as  provided  in  the  act.  (Laws  1843,  p.  109.)  The 
company  entered  upon  the  work  of  constructing  the  road,  but 
the  venture  failed  and  its  charter  was  finally  repealed.  (Laws 
1845,  1849,  1851.)  When  this  charter  was  finally  repealed,  all 
of  the  property  granted  by  it  and  all  the  improvements  made 
under  it  reverted  to  the  state. 

On  September  20,  1850,  congress  passed  an  act  granting  to  the 
State  of  Illinois  a  right  of  way  through  the  public  lands  and 
every  alternate  section  of  land  for  six  miles  in  width  on  each  side 
thereof,  to  aid  the  state  in  constructing  a  railroad  from  Cairo 
to  La  Salle,  with  one  branch  to  Chicago  and  another  to  Dubuque. 
This  act  of  congress  further  provided  that  the  lands  granted 
should  be  subject  to  the  disposal  of  the  legislature  of  Illinois, 
and  applied  to  the  construction  of  said  road  and  branches,  and 
to  no  other  purpose. 

On  February  10,  1851,  the  general  assembly  of  Illinois  passed 
an  act  incorporating  the  Illinois  Central  Railroad  Company, 
the  defendant  in  this  suit.  This  act  or  charter  contains  twenty- 
seven  sections.  I  shall  not  now  discuss  these  sections  in  detail, 
but  the  scope  of  this  charter  as  a  whole. 


This  charter  authorized  the  company  to  locate,  construct 
and  operate  a  main  line  of  railroad  and  two  branches;  the  main 
line  to  extend  from  Cairo  to  La  Salle,  one  of  the  branches  from 
Centralia  to  Chicago,  and  the  other  from  La  Salle  to  a  point 
opposite  the  city  of  Dubuque. 

It  vested  the  corporate  powers  of  the  company  in  a  board  of 
directors  and  such  officers  and  agents  as  they  might  appoint. 
The  governor  of  Illinois  was  made  a  director  ex-offkio,  with 
power  to  vote,  either  in  person  or  by  proxy. 

The  charter  contains  a  number  of  provisions  which  have  no 
direct  bearing  upon  the  issues  here.  They  are  largely  matters 
of  detail  pertaining  to  the  construction,  completion  and  opera- 
tion of  the  road,  the  sale  of  the  bonds  and  the  disposal  of  the 
lands.     I  shall  not  take  time  to  mention  them  further. 

By  section  15  of  this  charter,  the  Illinois  Central  Railroad 
Company  was  granted  all  the  lands  ceded  to  the  State  by  the 
act  of  congress  of  1850.  Furthermore,  the  company  was  granted 
depot  grounds  in  the  city  of  Cairo,  the  right  of  way  and  all  of  the 
improvements  made  thereon  by  the  Internal  Improvement 
Commission  and  the  Great  Western  Railroad  Company  under 
the  acts  of  1837  and  1843,  heretofore  mentioned.  All  of  this 
latter  property  was  in  addition  to  that  ceded  the  state  by  the 
act  of  congress  of  1850. 

I  shall  digress  for  a  moment  from  the  analysis  of  this  charter, 
to  examine  the  character  and  extent  of  this  land  grant  and  the 
present  attitude  of  defendant  in  relation  thereto. 

Under  this  charter,  the  Illinois  Central  Railroad  Company 
was  granted,  by  the  State  of  Illinois,  2,595,000  acres  of  land.  In 
square  miles,  this  body  of  land  was  a  principality;  in  fertility  of 
soil,  it  was  unsurpassed.  The  company  was  authorized  to  sell 
these  lands  upon  credit  and  execute  contracts  for  deeds,  and  no 
matter  how  long  these  contracts  ran,  the  lands  were  exempt  from 
taxation  until  actually  conveyed  to  the  purchasers — and  this 
court  has  so  held.  (People  v.  Ketchum,  72  111.,  212).  This 
exemption  not  only  enhanced  the  value  of  these  lands,  but  gave 
impetus  to  their  sale.  The  result  was  that  down  to  1875  the 
company  realized  from  the  sales  of  these  lands  over  twenty-seven 
million  dollars,  and  since  that  time  nearly  three  million  more. 

Counsel  say  in  their  brief  that  the  value  of  the  donation  must 
be  established  as  of  the  time  it  was  given;  that  when  the  grant  was 
made,  government  lands  were  selling  at  $1.25  per  acre;  that  so 
valued,  the  grant,  instead  of  being  thirty  million  dollars,  did  not 


8 

exceed  three  million;  that  the  value  of  these  lands  increased  on  account 
of  the  road  built  by  capital  contributed  by  its  stockholders. 

Such  statements  as  these  avail  nothing.  Paragraph  17  of 
the  bill  avers  that  over  two  million  acres  of  these  lands  were  sold 
prior  to  1875,  at  an  average  price  of  $11.94  an  acre,  and  that 
from  the  sales  of  all  of  these  lands  the  Illinois  Central  Railroad 
Company  realized  over  thirty  million  dollars.  And  these  facts 
are  admitted  by  the  demurrers. 

In  addition  to  these  lands,  the  company  was  granted,  by  this 
charter,  a  right  of  way  two  hundred  feet  in  width  and  seven 
htmdred  five  and  one-half  miles  in  length. 

The  claim  is  now  made  that  the  Illinois  Central  Railroad 
Company  is  not  the  beneficiary  of  the  State  of  Illinois;  that  it 
owes  the  state  nothing  because  of  this  land  grant — not  even  a 
vote  of  thanks.  Furthermore,  counsel  insinuate  the  state  was 
not  warranted  in  attaching  to  the  grant  a  provision  securing  to 
itself  perpetual  revenue. 

They  say,  in  their  brief: 

"While  the  federal  land  grant  was  to  the  state,  a  private 
company  was  intended  as  the  ultimate  donee.  The  state  was 
but'a  trustee,  having  the  duty  to  see  that  the  lands  were  devoted 
to  the  purpose  specified.  The  United  States  was  the  donor;  the 
state  the  intermediary." 

Their  argument,  in  substance,  is  that  since  the  lands  were 
ceded  by  congress  to  the  state,  to  aid  in  the  construction  of  a 
railroad,  and  could  be  used  for  no  other  purpose,  the  state  never 
owned  a  foot  of  these  lands ;  that  in  truth  and  in  fact  these  lands 
were  granted  by  congress  to  the  Illinois  Central  Railroad  Com- 
pany, and  the  state  was  a  mere  instrument  to  pass  the  title. 

The  fact  is,  when  the  lands  were  ceded  by  congress  to  the 
state,  the  Illinois  Central  Railroad  Company  was  not  in  existence. 
It  was  not  incorporated  until  five  months  later.  There  is  nothing 
in  the  act  of  congress  to  show  that  the  Illinois  Central  Railroad 
Company  was  then  even  thought  of — and  this  court  has  so  held. 
(Board  of  Equalization  v.  People,  229  111.,  452.) 

While  the  grant  made  by  congress  was  to  aid  in  constructing 
a  railroad — and  the  lands  could  be  used  for  no  other  purpose — 
the  grant  was  made  to  the  State  of  Illinois.  While  the  object 
of  the  grant  was  to  build  a  railroad — and  the  state  was  bound  by 
this  object — as  to  the  means  to  be  employed  in  accomplishing 
this  object,  as  to  how  or  by  whom  the  road  should  be  built,  the 
state  was  absolutely  free  to  determine. 


The  state  itself  could  have  built  the  road,  applied  the  lands 
to  the  payment  thereof  and  operated  the  road,  as  was  done  in  the 
case  of  the  Illinois  and  Michigan  Canal,  under  a  similar  grant. 
Cotmsel  say,  the  limit  of  indebtedness  fixed  by  the  constitution 
of  1848  made  it  well  nigh  impossible  for  the  state  to  again  under- 
take a  work  of  such  magnitude.  In  view  of  the  land  grant,  this 
statement  is  remarkable. 

The  State  could  have  let  a  contract  to  build  the  road,  sold 
the  lands  to  pay  the  cost  of  construction,  owned  the  road  and 
leased  it. 

The  state  could  have  renewed  the  charter  of  the  Great  Wes- 
tern Railway  Company  and  granted  the  lands  to  it,  or  have 
granted  the  lands  to  any  other  company  it  saw  fit  to  select. 
(Railroad  Company  v.  Maryland,  21  Wallace,  456.) 

The  Illinois  Central  Railroad  Company  was  chartered  and 
these  lands  were  granted  to  it  by  the  State  of  Illinois,  not  from 
necessity,  because  there  was  none,  but  through  voluntary  action 
on  the  part  of  the  state  and  in  the  exercise  of  its  right  to  convey 
property,  the  title  to  which  it  then  had. 

Counsel  say,  in  their  brief:  "The  state  seeks  to  create  the 
erroneous  impression  that  this  railroad  was  constructed  by  the 
state's  munificence."  If  it  be  true  that  this  donation  of  lands 
was  not  made  by  the  state;  if  it  be  true  that  this  railroad  was 
not  constructed  by  the  state's  munificence,  this  court  has  been 
wrong  for  forty  years.  In  Illinois  Central  Railroad  Company  v. 
Irwin,  72  111.,  454,  this  court  held  that  no  authority  was  given  the 
company  to  engage  in  carrying  except  by  the  charter  lines;  that  the 
charter  related  to  this  purpose  and  none  other.  The  court,  per 
Justice  Schofield,  said:  "It  was  to  aid  in  it  that  the  munificent 
donation  of  lands  was  made  by  the  state." 

The  contention,  that  when  these  lands  were  granted  to  the 
Illinois  Central  Railroad  Company  by  the  State  of  Illinois,  the 
company  was  not  the  beneficiary  of  the  state,  which  owned  the 
lands  and  made  the  grant,  reflects  no  credit  upon  this  defendant. 

Furthermore,  by  section  15  of  this  charter,  property  and 
valuable  rights  were  granted  to  the  Illinois  Central  Railroad 
Company,  in  addition  to  the  lands  ceded  the  state  by  the  act  of 
congress  of  1850.  It  is  idle  to  say  this  property  was  of  little 
value.     There  is  no  basis  whatever  for  any  such  claim. 

By  section  22,  the  company  was  exempted  from  the  payment 
of  all  taxes,  except  state  taxes,  and  even  state  taxes  were  limited 
as  to  rate. 


10 

As  shown  by  the  bill,  the  company  accepted  this  charter, 
borrowed  money  on  the  strength  of  the  land  grant,  built  the 
road,  sold  the  lands,  and  out  of  the  proceeds  got  thirty  million 
dollars.  I  will  not  say  this  was  enough  to  build  and  equip  the 
road,  because  the  bill  does  not  aver  it.  But  I  will  say,  what 
everybody  knows,  that  in  building  and  equipping  a  railroad 
seven  hundred  five  and  a  half  miles  in  length,  thirty  million 
dollars,  or  forty-two  thousand  dollars  a  mile,  went  a  mighty  long 
ways. 

In  the  face  of  these  facts,  this  company  now  declares  that 
it  is  not  now,  and  never  has  been,  under  a  single  obligation  to  the 
State  of  Illinois  on  account  of  this  land  grant.  Some  one  says, 
"every  furrow  in  the  Book  of  Psalms  is  sown  with  the  seeds  of 
gratitude."  I  commend  this  Book  to  the  present  officials  of  the 
Illinois  Central  Railroad  Company. 

Section  18  of  this  charter  provides,  in  part,  as  follows: 

"In  consideration  of  the  grants,  privileges  and  franchises 
herein  conferred  upon  said  company  for  the  purposes  aforesaid, 
the  said  company  shall,  on  the  first  Mondays  of  December  and 
June,  in  each  year,  pay  into  the  treasury  of  the  State  of  Illinois 
five  per  centum  on  the  gross  or  total  proceeds,  receipts  or  income 
derived  from  said  road  and  branches  for  the  six  months  then  next 
preceding.  *  *  *  And  for  the  purpose  of  ascertaining  the 
proceeds,  receipts  or  income  aforesaid,  an  accurate  accoimt 
shall  be  kept  by  said  company,  a  copy  whereof  shall  be  furnished 
to  the  governor  of  the  State  of  Illinois;  the  truth  of  which  ac- 
count shall  be  verified  by  the  affidavits  of  the  treasurer  and  sec- 
retary of  such  company.  And  for  the  purpose  of  verifying  and 
ascertaining  the  accuracy  of  such  account,  full  power  is  hereby 
vested  in  the  governor  of  the  State  of  Illinois,  or  any  other 
person  by  law  appointed,  to  examine  the  books  and  papers  of 
said  corporation,  and  to  examine,  under  oath,  the  officers, 
agents  and  employees  of  said  company,  and  other  persons.  *  *  *" 

Section  22,  after  exempting  the  lands  from  taxation  until 
sold,  and  the  property  of  the  company  for  six  years,  provides 
as  follows: 

"After  the  expiration  of  six  years,  the  stock,  property  and 
assets  belonging  to  said  company  shall  be  listed  by  the  presi- 
dent, secretary  or  other  officer,  with  the  auditor  of  state,  and  an 
annual  tax  for  state  purposes  shall  be  assessed  by  the  auditor 
upon  all  the  property  and  assets  of  every  name,  kind  and  de- 
scription belonging  to  said  corporation.     Whenever  the   taxes 


11 

levied  for  state  purposes  shall  exceed  three-fourths  of  one  per 
centum  per  annum,  such  excess  shall  be  deducted  from  the  gross 
proceeds  or  income  herein  required  to  be  paid  by  said  corpo- 
ration to  the  state,  and  the  said  corporation  is  hereby  exempted 
from  all  taxation  of  every  kind,  except  as  herein  provided  for. 
The  revenue  arising  from  said  taxation,  and  the  said  five  per 
cent  of  gross  or  total  proceeds,  receipts  or  income  aforesaid, 
shall  be  paid  into  the  state  treasury  in  money,  and  applied  to 
the  payment  of  interest  paying  state  indebtedness,  until  the 
extinction  thereof:  Provided,  in  case  the  five  per  cent  pro- 
vided to  be  paid  into  the  state  treasury,  and  the  state  taxes  to  be 
paid  by  the  corporation  do  not  amount  to  seven  per  cent  of  the 
gross  or  total  proceeds,  receipts  or  income,  then  the  said  com- 
pany shall  pay  into  the  state  treasury  the  difference,  so  as  to 
make  the  whole  amount  paid  equal  at  least  to  seven  per  cent  of 
the  gross  receipts  of  said  corporation." 

The  constitution  of  1870  provides  that  after  the  payment 
of  the  state  debt,  the  moneys  payable  under  this  section  shall  be 
appropriated  and  set  apart  for  the  payment  of  the  ordinary 
expenses  of  the  state  government. 

The  last  section  of  this  charter  provides  as  follows : 

"This  act  shall  be  deemed  a  public  act  and  shall  be  favorably 
construed  for  all  purposes  therein  expressed  and  declared,  in  all 
courts  and  places  whatsoever.     *     *     *" 

This  provision,  however,  in  no  manner  affects  the  rule  of 
construction  that  would  otherwise  apply.  This  Court  has 
expressly  held  that  a  provision  of  this  kind  has  no  legal  signifi- 
cance whatever.  (Theological  Seminary  v.  People,  174  111,, 
177.) 

Such,  in  brief,  are  the  main  provisions  of  this  charter.  Upon 
its  acceptance,  it  became  a  contract  between  the  State  of  Illi- 
nois and  the  Illinois  Central  Railroad  Company. 

In  the  Neustadt  case  (31  111.,  484)  this  court,  per  Justice 
Breese,  said: 

"The  act  to  incorporate  the  Illinois  Central  Railroad  Com- 
pany *  *  *  is  a  contract  between  the  state  and  the  com- 
pany, which  cannot  be  changed  or  annulled  without  the  consent 
of  both  contracting  parties." 

In  the  Goodwin  case  (94  111.,  262)  this  court,  per  Justice  Wal- 
ker, said: 

"It  has  been  repeatedly  held  that  this  charter  forms  a  con- 
tract between  the  state  and  the  company." 


12 

In  every  other  case  where  this  charter  has  been  before  this 
court,  the  same  doctrine  has  been  announced. 

This  charter,  being  a  contract  between  the  company  and  the 
state,  the  rule  of  construction  is  that  every  doubt  must  be 
be  resolved  in  favor  of  the  state.  The  doctrine  of  this  court  may 
be  summed  up  in  this  statement:  In  construing  a  charter,  if 
reasonable  doubts  arise,  they  must  all  be  solved  in  favor  of  the  state, 
and  where  two  meanings  are  reasonably  possible,  one  restricting 
and  the  other  extending  the  favor  of  the  corporation,  the  one  must 
be  adopted  which  works  the  least  harm  to  the  state.  Applying  these 
rules  to  this  charter,  what  obligations  were  created  by  it  and 
what  relations  resulted  from  it? 

The  obligations  of  the  state  were  to  convey  to  the  company 
the  lands  to  build  the  road  and  exempt  its  property  from  the 
payment  of  all  taxes,  except  state  taxes.  The  charter  itself 
created  this  exemption  and  the  bill  avers  the  lands  were  con- 
veyed. 

The  obligations  of  the  company,  so  far  as  now  material,  were 
to  build  and  operate  the  road  and  branches  and  pay  into  the 
state  treasury,  each  and  ever)'-  year,  an  amount  equal  to  at  least 
seven  per  cent  of  the  gross  receipts  derived  from  the  road  and  branches, 
keep  an  accurate  account  of  such  receipts,  and  furnish  the  governor 
copies  of  the  account. 

In  other  words,  to  the  enterprise  of  building  and  equipping 
this  railroad,  the  state  furnished  the  capital,  in  the  form  of  a 
franchise,  a  grant  of  lands  and  an  exemption  from  general  taxes. 
In  consideration  thereof,  the  company  agreed  to  build  the  road, 
conduct  the  business  of  its  operation,  keep  an  accurate  account 
of  the  total  receipts,  furnish  the  governor  copies  thereof,  and 
pay  to  the  state  each  and  every  year,  on  account  of  its  invest- 
ment, at  least  seven  per  cent  of  the  total  receipts  derived  from 
the  road  and  branches.  No  other  meaning  can  be  given  this 
contract. 

Such  being  its  meaning,  what  are  the  relations  of  the  parties 
under  it?  In  the  transactions  essential  to  its  performance,  do 
they  stand  at  arm's  length  and  upon  an  equal  footing,  or  must 
trust  and  confidence  be  reposed  by  the  one  in  the  absolute 
honesty  and  fair-dealing  of  the  other?  If  the  latter  be  true — 
and  it  is  true — a  fiduciary  relation  exists. 

Defendant's  counsel  insist  that  since  the  company  is  re- 
quired to  furnish  the  governor,  semi-annually,  a  copy  of  its 
accoimt,  and  since  the  governor  is  ex-officio  a  director  in  the 


13 

company,  is  authorized  to  examine  the  books,  and  the  officers  and 
agents,  under  oath,  no  fiduciary  relation  exists. 

One  answer  is,  the  company  has  failed,  semi-annually,  or 
at  any  other  time,  to  furnish  the  governor  a  copy  of  its  account, 
as  required  by  this  charter. 

It  is  true,  the  governor  is  a  director  ex-officio,  and  jor  the 
purpose  of  verifying  and  ascertaining  the  accuracy  of  the  account, 
is  authorized  to  examine  the  books  and  the  officers  and  agents, 
under  oath.  But  such  provisions  do  not  affect  the  fiduciary 
relation,  if,  without  such  provisions,  the  relation  would  exist, 
and  the  courts  so  hold.     (125  Fed.  Rep.,  342.) 

To  say,  because  the  governor  is  a  director  in  this  railroad, 
is  authorized  to  examine  the  books  and  the  officers  and  agents, 
under  oath,  the  state  can  acquire,  as  to  the  business  of  the  road, 
its  earnings  and  receipts,  equal  knowledge  with  the  company 
itself,  is  wasting  words. 

Under  this  charter  the  company  runs  the  road,  manages  the 
business,  collects  the  receipts  and  keeps  the  books.  The  acts 
and  conduct,  upon  the  performance  of  which  the  revenue  of  the 
state  depends,  are  the  acts  and  conduct  of  the  Illinois  Central 
Railroad  Company,  and  by  the  good  faith  of  these  acts  and  the 
honesty  of  this  conduct,  the  revenue  of  the  state  is  measured. 
The  books,  records  and  accounts,  and  all  of  the  facts  which  make 
up  the  transactions  concerning  which  this  accounting  is  sought, 
are  peculiarly  within  the  knowledge  of  defendant.  The  company 
owns  the  road,  but  its  ownership  is  impressed  with  a  duty  to  pay 
the  state  a  per  centum  upon  its  gross  receipts,  and  this  duty  is  a 
continuing  duty. 

We  do  not  claim  a  partnership  exists  between  the  company 
and  the  state.  And  a  partnership  is  not  essential  to  a  fiduciary 
relation.  We  do  not  claim  this  charter  creates,  in  a  technical 
sense,  the  relation  of  trustee  and  cestui-que-trust.  And  this  is 
not  necessary  to  a  fiduciary  relation. 

What  we  do  claim  is  that,  under  this  charter,  continuous 
confidence  is  and  must  be  reposed  by  the  state  in  the  honesty 
and  fair-dealing  of  the  Illinois  Central  Railroad  Company.  And 
whenever  such  a  condition  exists,  by  whatever  name  it  may  be 
called,  a  fiduciary  relation  exists. 

The  authorities  hold — and  many  cases  are  cited  in  our  brief — ■ 
that  a  fiduciary  relation  exists,  not  only  between  guardian  and 
ward,  trustee  and  beneficiary,  and  the  like,  but  in  every  case  where 
continuous  confidence  is  reposed  by  one  person  in  the  honesty  and 


14 

fair-dealing  of  another;  that  the  law  looks  to  the  real  rather  than  to 
the  nominal  condition,  and  that  courts  are  careful  not  to  restrict  the 
relationship  by  defining  the  exact  limits  of  its  existence. 

In  the  recent  case  of  State  v.  Chicago  and  Northwestern 
Railway  Company,  132  Wis.,  345,  which  was  a  suit  by  the  state 
for  an  accounting,  under  a  statute  requiring  railroads  to  file 
with  the  state  treasurer  a  true  statement  of  their  gross  earnings, 
for  the  purpose  of  obtaining  a  license  and  measuring  the  license 
fee  to  be  paid  the  state,  the  court  said : 

"The  relationship  of  the  state  and  the  defendant  respecting 
these  obligations  is  such  that  there  is  cast  upon  the  defendant 
the  duty  of  keeping  a  correct  account  of  its  gross  earnings,  to 
enable  the  state  to  ascertain  the  extent  of  its  claim,  and  from  this 
falls  the  duty  of  rendering  to  the  state  a  true  and  correct  report 
of  these  transactions.  These  circumstances,  of  necessity,  create 
a  relationship  in  which  the  defendant  has  the  duty  of  protecting 
the  rights  of  the  state  issuing  out  of  the  transaction,  by  keeping 
a  true  and  correct  record  of  its  business  affairs  respecting  them, 
and  by  rendering  an  accoimt  of  its  performance  of  this  obliga- 
tion." 

In  Western  Union  Telegraph  Company  v.  American  Bell 
Telephone  Company,  125  Fed.  Rep.,  342  (decided  in  1903),  the 
facts  were:  The  telegraph  company,  in  order  to  protect  its 
business  against  inroads  by  telephones,  leased  and  transferred 
to  the  telephone  company  its  interests  in  certain  telephonic 
patents  and  equipment,  whereby  it  was  to  receive  a  certain 
proportion  of  the  rentals  paid  to  the  telephone  company.  The 
lease  further  provided  that  the  books  should  be  bept  by  the  tele- 
phone company  and  be  open  to  the  inspection  of  the  telegraph 
company.     The  court  say: 

"The  telegraph  company  assigned  substantially  all  its 
interest  in  telephonic  patents,  to  be  worked  by  the  telephone 
company  for  their  joint  benefit,  certain  net  results  to  be  shared 
on  an  agreed  percentage.  While  this  did  not  create  the  technical 
relationship  of  trustee  and  cestui-que -trust,  it  established  a 
quasi  trust.  *  *  *  j^  contemplating  the  construction  and 
effect  of  the  contract,  we  must  first  of  all  consider  that  the  rela- 
tionship of  the  parties  to  it  were  of  the  fiduciary  character  to 
which  we  have  referred.  So  that  the  telephone  company,  as 
the  sole  holder  of  the  joint  interests,  left  in  exclusive  control 
thereof,  was  bound  to  the  underlying  rule  that  neither  directly 


IS 

nor  indirectly  nor  by  any  artifice  whatever  should  the  Western 
Union  be  deprived  of  its  share  in  the  net  profits  of  the  leases." 

Many  other  cases  to  the  same  effect  are  cited  in  our  brief. 
Neither  the  doctrines  there  announced,  nor  their  application 
to  this  case,  are  challenged  in  defendant's  brief.  That  under 
this  charter  a  fiduciary'  relation  exists  between  the  State  of 
Illinois  and  the  Illinois  Central  Railroad  Company,  is  beyond  all 
question 


MAGNITUDE  AND  INTRICACY  OF  ACCOUNTS. 

Furthermore,  the  degree  of  particularity  required  in  averment 
in  a  bill  for  an  accounting  largely  depends  upon  and  is  measured 
by  the  character  and  extent  of  the  accounts  involved.  I  am 
safe  in  saying  that  in  number,  intricacy,  detail  and  extent,  the 
accoimts  involved  in  this  bill  have  no  parallels  in  the  history 
of  American  courts. 

Paragraph  157  of  the  bill  avers,  in  part,  as  follows: 

"That  it  would  be  impracticable  for  your  orator,  without 
improperly  incumbering  the  records  of  this  honorable  court,  to 
set  forth  in  detail  the  many  items  of  proceeds,  receipts  or  income 
for  which  said  defendant  has  failed  to  accotmt  to  your  orator; 
*  *  *  that  the  books  of  account  and  the  papers  and  vouchers 
referring  to  said  items  so  omitted  and  referring  to  the  items 
which  have  been  falsely  entered  as  aforesaid  in  the  defendant's 
accoimt,  are  so  nimierous  and  so  voluminous  that  those  pertain- 
ing to  any  single  period  of  six  months  since  the  year  1877,  would 
occupy  almost  the  entire  space  of  an  ordinary  railroad  freight 
car  in  use  at  the  present  time,  and  the  specification  of  all  of  said 
items  omitted  from  or  falsely  entered  in  said  accoiint  and  apt 
allegations  to  charge  the  defendant  therewith,  would  occupy 
many  thousands  of  pages." 

I  confess,  at  first  blush,  this  statement  seems  appalling.  But 
when  the  intricacies  of  this  lawsuit  begin  to  unfold  this  statement 
will  seem  modest.  The  facts  averred  in  this  paragraph  are 
admitted  by  the  demurrers.  Furthermore,  the  averment  that 
the  books,  papers  and  vouchers  pertaining  to  any  six  months' 
period,  are  so  voluminous  as  to  occupy  the  space  of  an  ordinary 
freight  car,  is  defendant's  own  statement.  It  was  made  to  the 
governor  as  an  excuse  for  not  filing  a  detailed  copy  of  the  account. 
We  trust  defendant  will  not  be  so  heartless  as  to  now  disown  its 
own  child. 


16 

RULES  OF  PLEADING  APPLICABLE  TO  BILL. 

This  being  a  bill  for  an  accounting  covering  a  period  of  thirty 
years,  the  accounts  being  intricate  and  including  thousands  of 
items,  a  fiduciary  relation  existing  between  the  parties,  and  the 
facts  being  peculiarly  within  the  knowledge  of  defendant,  what 
rules  of  pleading  as  to  particularly  and  detail  apply  to  this  bill? 

One  rule  of  pleading  is,  that  whenever  an  enumeration  of  parti- 
culars would  lead  to  great  prolixity,  a  general  statement  is  sufficient. 

Another  rule  is,  that  all  of  the  averments  of  a  bill  touching  any 
given  matter,  must  be  taken  together  and  not  singly.  If  all  of  the 
averments,  including  the  exhibits,  considered  together,  are  suffi- 
cient to  support  a  particular  matter,  the  bill  is  sufficient  in  that 
respect. 

Another  rule  is,  that  whenever  a  fiduciary  relation  exists,  all  a 
hill  for  an  accounting  need  aver  are  the  facts  showing  the  relation, 
the  existence  of  unsettled  accounts,  a  balance  due,  and  in  some 
cases  a  demand.  This  doctrine  is  so  well  settled  in  this  court, 
that  to  read  decisions  would  only  waste  time. 

Another  rule  equally  well  settled  is,  that  where  the  hooks  and 
accounts  are  kept  by  the  aefendant  and  the  facts  are  peculiarly 
within  his  knowledge,  details  and  items  need  not  he  set  out,  hut 
general  averments  alone  are  sufficient. 

As  was  said  by  Mr.  Justice  Vickers,  while  on  the  appellate 
bench  (116  App.,  311): 

"  It  falls  harshly  on  the  ear  of  a  court  of  chancery  to  hear  the 
defendant  in  error  complaining  that  plaintiff  in  error  has  not  set 
out  specifically  all  the  various  items  of  the  transaction  when  the 
record  of  them  is  in  the  possession  of  defendant  in  error." 

Keeping  in  mind  these  well  settled  rules,  an  analysis  of  this 
bill  will  conclusively  show  that  ample  facts  are  sufficiently 
averred  to  support  each  and  every  of  the  state's  claims. 


ANALYSIS  OF  BILL— SEPARATE  DEMURRERS. 

For  convenience,  the  bill  is  divided  into  paragraphs  num- 
bered from  1  to  168,  inclusive. 

Paragraphs  1  to  17,  inclusive,  set  out  the  act  of  congress  of 
1850,  which  ceded  the  lands  to  the  state,  the  charter  of  the  Illi- 
nois Central  Railroad  Company,  and  the  various  amendments 
thereto,  the  acceptance  of  the  charter  and  the  construction  of 
the  main  line  and  branches.     The  various  public  acts  included  in 


17 

these  paragraphs  were  set  out  as  a  matter  of  convenience  to 
counsel  and  the  court. 

The  main  line  extends  from  Cairo  to  La  Salle,  a  distance  of 
308.99  miles.  One  branch  extends  from  La  Salle  to  Dunleith, 
a  distance  of  146.73  miles.  (Dunleith  is  now  East  Dubuque.) 
The  other  branch  extends  from  Chicago  to  Centralia,  or  Branch 
Junction,  a  distance  of  249.78  miles.  The  total  length  of  this 
main  line  and  these  two  branches  is  705.5  miles.  This  main 
line  and  these  two  branches  are  denominated  in  the  bill,  and  will 
be  referred  to  in  this  argument,  as  the  charter  lines. 

Paragraph  16  avers  that  the  charter  lines  and  the  St.  Charles 
Air  Line  (not  here  involved)  were  the  only  lines  of  railroad 
which  the  Illinois  Central,  under  its  charter,  was  authorized  to 
build,  acquire  or  operate. 

Paragraph  17  avers,  in  substance,  that  the  state,  by  its 
governor,  conveyed  to  defendant,  in  fee  simple,  all  of  the  lands 
ceded  by  the  act  of  congress  of  1850,  together  with  a  right  of 
way,  and  all  of  the  property  mentioned  and  described  in  section 
15  of  the  charter,  and  that  from  the  sales  of  said  lands  the  Illi- 
nois Central  realized  over  thirty  million  dollars. 

Paragraphs  18  and  19  aver,  in  substance,  that  down  to  about 
the  year  1877,  the  charter  lines  comprised  practically  the  entire 
system  of  railroads  owned,  controlled  or  operated  by  the  Illinois 
Central  Railroad  Company,  but  shortly  thereafter  the  company, 
assuming  to  act  under  the  general  railroad  statutes  of  Illinois, 
began  extensively  and  systematical^  to  build  and  acquire  other 
branches  and  lines  of  railroad  in  Illinois  and  elsewhere,  for  the 
purpose  of  ultimately  building  up  and  operating  a  great  and 
extensive  svstem  of  railroads. 


THE  NON-CHARTER  LINES. 

Paragraphs  20  to  62,  inclusive,  set  forth  and  describe  the 
different  branches  and  lines  of  railroad  acquired  by  defendant 
since  1877  and  detail  the  various  methods  of  their  acquirement. 
Some  of  these  lines  were  built  by  defendant;  some  were  pur- 
chased outright;  some  were  acquired  by  consolidation,  and  some 
were  leased  and  afterwards  taken  over.  A  number  of  the  leases 
are  set  out  in  these  paragraphs.  The  reason  therefor  will  be 
apparent  when  we  get  to  the  question  of  the  division  of  earnings. 

In  acquiring  these  branches  and  lines  of  railroad,  the  Illinois 
Central  Railroad  Company  neither  acted  nor  assumed  to  act 

(2) 


18 

under  its  charter  powers,  but  under  and  by  virtue  of  additional 
powers  created  and  conferred  by  the  general  statutes  of  Illinois. 
While  the  state  concedes  defendant's  right  to  lawfully  exercise 
these  additional  powers  and  acquire  and  operate  other  lines  of 
railroad,  in  no  event  and  under  no  circumstances  can  these  ad- 
ditional powers  be  exercised  nor  other  lines  of  railroad  be  oper- 
ated, to  the  prejudice  or  impairment  of  the  rights  of  the  state 
under  defendant's  charter.  These  additional  powers,  whatever 
they  may  have  been,  were  subsequent  to  the  charter  and  subject 
to  all  the  contract  rights  which  had  then  vested  under  it. 

These  various  branches  and  lines  of  railroad  acquired  by 
defendant  since  1877,  under  authority  of  the  general  statutes, 
are  denominated  in  the  bill,  and  will  be  referred  to  in  this  argu- 
ment, as  the  non-charter  or  branch  lines.  If  it  be  kept  in  mind 
that  the  words  charter  lines,  whenever  and  wherever  used  in  the 
bill  and  during  this  argument,  include  only  the  lines  described 
in  defendant's  charter,  and  the  words  non-charter  lines  or  branch 
lines  include  only  the  lines  acquired  by  defendant  since  1877, 
under  authority  of  the  general  statutes,  all  confusion  will  be 
avoided. 


THE  ILLINOIS  CENTRAL  SYSTEM. 

Paragraphs  63  and  64  refer  to,  and  by  express  provision,  make 
a  part  of  the  bill  exhibits  "1"  and  "2." 

Exhibit  "1"  is  found  on  pages  265  and  266  of  the  abstract. 
(The  abstract  pages  are  in  red.)  It  is  a  detailed  statement  of 
all  the  lines  and  branches  of  railroad  which  make  up  the  Illinois 
Central  System.  The  mileage  of  the  charter  lines  is  first  given. 
Then  follows  the  termini  and  mileage  of  each  one  of  the  non- 
charter  lines ;  the  total  number  of  non-charter  lines  and  branches 
being  55.  The  total  mileage  of  defendant's  entire  system  is 
4,377  miles.  Of  this  mileage,  the  charter  lines  comprise  705^ 
miles,  and  the  non-charter  lines  3,672  miles. 

Exhibit  "2"  is  the  map  following  page  266.  By  mistake  it  is 
marked  exhibit  "B"  instead  of  exhibit  "2."  This  map  correctly 
represents  the  present  system  of  railroads  operated,  controlled 
and  practically  owned  by  the  Illinois  Central  Railroad  Company. 
Will  your  honors,  for  a  moment,  kindly  turn  to  this  map  follow- 
ing page  266? 

.  The  heavy  lines  in  red  represent  the  charter  lines 


19 

The  lines  in  green  represent  the  non-charter  or  branch  lines 
within  the  State  of  Illinois,  and  two  or  three  branches  extending 
into  Indiana  and  Kentucky.  The  bill  avers  that  all  of  these 
branches,  except  one,  are  now  owned  absolutely  by  the  Illinois 
Central. 

The  line  in  purple,  at  the  top  of  the  map,  extending  from 
Chicago  to  Freeport,  thence  to  Red  Oak,  and  there  branching 
to  Madison  and  Dodgeville  represents  the  Chicago,  Madison 
and  Northern  Railroad,  a  non-charter  line  partly  in  Illinois  and 
partly  in  Wisconsin.  The  bill  avers  that  this  line  of  railroad  is 
owned  absolutely  by  defendant. 

The  lines  in  yellow,  at  the  top  and  left  of  the  map,  represent 
the  Dubuque  and  Sioux  City  Branches.  These  branches,  in  the 
main,  were  constructed  by  Iowa  corporations.  The  defendant 
acquired  control  of  these  Iowa  corporations,  and  in  1899  coh- 
solidated  them  into  one  company,  called  the  Dubuque  and 
Sioux  City  Railroad  Company.  The  capital  stock  of  this  con- 
solidated company  consisted  of  80,000  shares,  of  the  par  value  of 
$100  each,  of  which  78,973  shares  were  issued  to  and  are  now 
owned  by  defendant.  This  consolidated  company,  at  various 
times,  leased,  or  pretended  to  lease,  all  of  these  branches  to  the 
Illinois  Central.  The  last  lease  was  executed  in  1904  and  ex- 
pires in  1951.  These  Dubuque  and  Siotix  City  branches  com- 
prise the  western  division  of  defendant's  system,  and  connect 
with  the  charter  lines  at  Dubuque  by  means  of  the  Dubuque 
bridge. 

The  lines  in  bhie,  at  the  bottom  and  right  of  the  map,  repre- 
sent the  branches  south  of  the  Ohio  river.  These  branches 
were  constructed,  in  the  main,  by  the  Chicago,  St.  Louis  and  New 
Orleans  Railroad  Company,  a  corporation  organized  under  the 
laws  of  Louisiana  and  other  states.  The  defendant  acquired 
a  controlling  interest  in  the  stock  and  bonds  of  this  company 
and  immediately  thereafter  leased  all  of  its  property,  rights  and 
franchises  for  the  term  of  400  years  from  July  1,  1882.  The 
lease  required  the  Chicago,  St.  Louis  and  New  Orleans  Railroad 
Company  to  maintain  its  corporate  organization  and  obligated 
the  Illinois  Central  to  purchase  all  of  the  outstanding  shares  of 
stock  of  the  Chicago,  St.  Louis  and  New  Orleans  Railroad  Com- 
pany which  might  be  offered.  Pursuant  to  this  lease,  defendant 
acquired  and  now  owns  all  of  the  capital  stock  and  bonds  of  the 
Chicago,  St.  Louis  and  New  Orleans  Railroad  Company.  AH  of 
these  branches  and  lines  of  railroad,  designated  in  blue,  lie  south 


20 

of  the  Ohio  river  and  comprise  the  southern  division  of  defen- 
dant's system.  This  southern  division  connects  with  the  charter 
lines  at  Cairo  by  means  of  the  Cairo  bridge. 

The  Hnes  in  black,  at  the  bottom  and  left  of  the  map,  repre- 
sent the  Yazoo  and  Mississippi  Valley  lines.  These  lines  were 
either  constructed  or  acquired  by  the  Yazoo  and  Mississippi 
Valley  Railroad  Company.  The  Illinois  Central  now  owns 
practically  all  of  the  capital  stock  of  the  Yazoo  and  Mississippi 
Valley  Railroad  Company,  and  by  reason  thereof  controls  abso- 
lutely the  operation  of  these  lines.  These  Yazoo  and  Mississippi 
Valley  lines  connect,  at  various  points,  with  the  southern  divi- 
sion of  defendant's  system  and  are  operated  in  connection  there- 
with. 

All  of  the  above  facts,  and  in  much  greater  detail,  are  averred 
in  paragraphs  20  to  64,  inclusive.  The  purpose  of  these  aver- 
ments was  to  disclose  to  the  court,  as  fully  and  completely  as 
possible,  all  of  the  facts  relevant  to  the  relations  between  the 
State  of  Illinois  and  the  Illinois  Central  Railroad  Company, 
whether  created  by  charter,  the  general  statutes  of  the  state, 
or  the  acts  of  the  company  itself.  A  knowledge  of  these  facts  is 
absolutely  essential  to  an  adequate  comprehension  of  the  issues 
in  this  case. 


THE  POLICY  OF  EXPANSION. 

During  the  argument  of  these  demurrers  in  the  court  below, 
defendant's  counsel  had  much  to  say  about  the  policy  of  expan- 
sion. They  eulogized  the  courage,  business  sagacity  and  self- 
sacrificing  spirit  of  the  officers  and  directors  of  the  Illinois  Central 
Railroad  Company.  They  asserted  that  out  of  these  qualities 
was  bom  a  policy  under  which  the  Illinois  Central  Railroad  has 
grown  from  700  miles  to  5,000  miles;  from  a  jerk-water  line  cros- 
sing a  single  state  into  a  system  spanning  half  a  continent. 
They  repeatedly  declared,  and  with  much  emphasis,  that  as  a 
result  of  this  far-sighted  policy,  millions  of  revenue  have  accrued 
to  the  state. 

Substantially  the  same  argument  is  found  in  their  brief. 
After  summarizing  the  totals  contained  in  the  semi-annual 
statements,  counsel  say: 

"These  figures  show  that,  with  due  allowance  for  the  periods 
of  great  business  depression,  the  payments  have  steadily  in- 
creased until  from  a  payment  of  $320,431.71,  made  in  1878,  the 


21 

state  received,  in  1906,  nearly  twelve  hundred  thousand  dollars. 
They  make  it  plain  that  through  the  policy  of  expansion  *  *  * 
the  state  has  immensely  profited." 

What  legitimate  purpose  can  be  subserved  by  such  an  argu- 
ment is  not  very  clear.  That  the  state  has  profited  by  the 
development  of  this  railroad  has  never  been  denied.  Nobody 
claims  the  Illinois  Central  has  yet  succeeded  in  appropriating  all 
of  the  increased  revenue. 

Furthermore,  the  policy  of  expansion  attributed  by  counsel 
to  the  courage  and  philanthropy  of  officials,  was  in  fact  due  to  the 
generosity  and  liberal  legislation  of  the  State  of  Illinois.  Because 
of  the  land  grant  made  in  1851  and  the  exemption  from  taxation, 
it  is  a  matter  of  history  that  the  Illinois  Central  was  paying 
dividends,  had  money  invested  in  stocks  and  bonds,  and  was  able 
to  expand  at  an  early  day  and  when  other  roads  were  struggling 
to  exist. 

The  Illinois  Central,  under  its  charter,  had  no  right  to  build, 
purchase,  lease  or  operate  a  single  mile  of  railroad,  other  than 
the  lines  described  in  its  charter.  Its  business,  rights  and  powers 
were  limited  absolutely  to  these  charter  lines,  and  this  court  so 
held  in  1874.  In  the  Irwin  case  (72  111.,  454)  this  court,  per 
Justice  Scholfield,  said: 

"No  authority  is  given  to  construct  other  lines  of  railroad  or 
to  engage  in  carrying  by  water  or  otherwise  than  by  the  lines 
of  railway  so  to  be  constructed.  Ever^'^  section  of  the  act  relates 
to  the  accomplishment  of  this  purpose,  and  none  other." 

After  this  decision,  the  State  of  Illinois,  through  its  legisla- 
tures, but  subject  to  the  rights,  duties  and  obligations  created 
by  the  charter,  extended  and  enlarged  the  powers  of  defendant  by 
general  statutes.  In  the  expansion  and  growth  of  the  Illinois 
Central  System,  back  of  the  courage,  foresight  and  philanthrophy 
of  directorates,  were  the  land  grant  of  the  state  supplying  the 
fimds,  and  the  general  statutes  of  the  state  conferring  the  power. 

As  a  result,  in  part  at  least,  of  this  policy  of  expansion  and 
growth,  the  charter  line  business  has  increased  and  the  revenue 
of  the  state  has  multiplied.  But  this  is  not  the  issue  involved 
in  this  lawsuit. 

The  issue  is,  has  the  Illinois  Central  Railroad  Company  ren- 
dered to  the  State,  in  the  way  of  per  centum,  all  that  is  due  under 
this  charter?  The  state  is  entitled  to  a  per  centum,  not  only 
upon  part  of  the  increased  earnings  of  the  charter  lines,  but  upon 
all  of  the  increased  earnings  of  the  charter  lines.     The  state 


22 

admits  it  has  received  a  per  centum  upon  part  of  the  increased 
earnings  of  the  charter  lines,  but  it  avers  in  this  bill  it  has  not 
received  a  per  centum  upon  all  of  the  increased  earnings  of  the 
charter  lines.  This  is  the  issue  presented  here,  and  this  issue 
must  be  met.  It  can  neither  be  side-tracked  nor  concealed 
behind  a  "straw  man." 


INTRICACY  OF  ACCOUNT— DUAL  INTERESTS. 

Paragraph  65  avers,  in  substance,  that  while  defendant's 
system  was  confined,  or  practically  confined,  to  the  charter  lines, 
the  matter  of  ascertaining  the  gross  or  total  receipts  derived 
from  the  charter  lines  and  keeping  an  accurate  account  thereof, 
as  required  bv  the  charter,  was  comparatively  simple.  But 
after  the  acquu-ement  of  the  non-charter  lines  and  the  operation 
of  the  charter  and  non-charter  lines  as  one  entire  system,  the 
matter  of  ascertaining  the  gross  receipts  derived  from  the  charter 
lines  and  keeping  an  accurate  account  thereof  became  more 
involved  and  difficult. 

Not  only  was  this  true,  but  when  defendant  acquired  these 
non-charter  lines  and  linked  them  up  with  the  charter  lines  into 
a  single  system,  its  interests,  in  part,  became  adverse  to  the  state, 
and  this  fact  cannot  be  disguised.  Thereupon  the  interests  of 
defendant  centered  in  the  operation  and  success  of  this  system 
as  a  whole.  The  per  centum  of  the  state  applied  only  to  the 
charter  lines.  The  net  earnings  of  both  the  charter  and  the 
non-charter  lines  flow  into  defendant's  treasury,  and,  in  the 
aggregate,  make  up  its  profits.  Its  chief  concern  is  the  amount 
of  this  aggregate,  and  not  the  sources  from  which  it  comes. 

Upon  the  gross  earnings  of  the  charter  lines,  the  defendant 
must  pay  a  per  centum  to  the  state.  Upon  the  gross  earnings 
of  the  non-charter  lines,  it  pays  no  per  centum  to  the  state 
whatever.  Under  such  conditions,  it  needs  no  argument  to 
show  that  the  interests  of  this  defendant  lie  in  increasing  the 
earnings  of  the  non-charter  lines,  at  the  expense  of  the  earnings 
of  the  charter  lines,  whenever  and  wherever  it  can  be  done  with- 
out injuring  the  business  of  the  system  as  a  whole.  And  the  bill 
avers  that  this  has  been  done,  and  systematicalty  done.  We  do 
not  question  defendant's  right  to  operate  the  charter  and  non- 
charter  lines  as  one  entire  system.  But  we  do  say  that  under 
this  charter,  and  the  fiduciary  relation  existing,  in  the  operation 
of  this  system,  the  movement  of  traffic  and  the  division  of  joint 


23 

earnings,   this  defendant   must  treat  the  state  with  absolute 
honesty  and  fairness. 


DUTY  UNDER  SECTIONS  18  AND  22. 

Paragraph  66  avers,  in  substance,  that  upon  the  acceptance 
of  the  charter,  it  became  the  duty  of  defendant,  as  provided  by 
sections  18  and  22, 

First — To  pay  into  the  state  treasury,  on  the  first  Mondays 
of  December  and  June  of  each  year,  five  per  centum  of  the  gross 
or  total  proceeds,  receipts  or  income  derived  from  the  charter 
lines  for  the  six  months  preceding,  keep  an  accurate  account 
thereof,  and  furnish  the  governor  a  copy  of  such  account,  veri- 
fied by  the  oaths  of  its  treasurer  and  secretary. 

Second — After  six  years,  to  list  with  the  auditor,  annually, 
for  the  purpose  of  state  taxation,  its  stock,  property  and  assets, 
and  pay  into  the  treasury  the  state  taxes  assessed  thereon. 

Third — In  case  the  said  five  per  centum  and  the  said  state 
taxes,  in  any  year,  did  not  amoiint  to  seven  per  cent  of  the  gross 
receipts  of  the  charter  lines,  to  pay  into  the  treasury  the  differ- 
ence, so  as  to  make  the  whole  amount  paid,  during  each  and  every 
year,  equal  at  least  to  seven  per  cent  of  the  gross  receipts  of  said 
corporation. 


FAILURE  TO  ASSESS^TAX— CONSEQUENT  DUTY. 

Paragraph  67  avers,  in  substance,  that  in  each  and  every 
year,  from  1859  to  1905,  the  defendant  knew  that  five  per  centum 
of  the  gross  receipts  of  the  charter  lines  and  the  state  tax  upon 
its  property,  when  taken  together,  would  not  amount  to  seven 
per  cent  of  the  gross  receipts  of  the  charter  lines  (the  minimum 
sum  it  was  required  to  pay) ,  and  the  auditor  likewise  knew  these 
facts;  that  for  these  reasons  the  defendant  did  not  list  its  prop- 
erty with  the  auditor  for  taxation  and  the  auditor  did  not  re- 
quire said  property  to  be  listed  and  did  not  assess  a  state  tax 
thereon,  in  any  of  said  years. 

That  upon  the  failure  of  defendant  to  list  its  property  for 
taxation  and  upon  the  failure  of  the  auditor  to  require  it  to  be 
listed  and  a  state  tax  assessed  thereon,  it  became  and  was  the 
duty  of  defendant,  in  each  of  said  years,  to  pay  into  the  treasury 
an  amount  equal  at  least  to  seven  per  cent  of  the  gross  receipts 
of  the  charter  lines ;  that  defendant  recognized  this  to  be  its  duty 


24 

and  during  each  of  said  years  assumed  and  undertook  to  comply- 
therewith  by  paying  into  the  treasury  seven  per  cent  of  the  total 
receipts  of  the  charter  lines,  as  claimed  and  reported  by  it. 

Other  parts  of  the  bill,  however,  aver  that  the  total  receipts, 
as  claimed  and  reported  by  defendant,  were  not  correct  in  any 
of  said  years.  In  this  paragraph  the  state  disclaims  all  right 
to  now  collect  a  state  tax  upon  defendant's  property.  This 
disclaimer  was  made  to  meet  an  objection  urged  to  the  original 
bill,  namely,  that  without  such  disclaimer  an  annual  state  tax 
can  now  be  collected  from  1859  to  1905.  The  disclaimer  itself 
amounts  to  nothing,  and  neither  does  the  objection  it  was  intend- 
ed to  meet. 

Paragraphs  68  and  69  aver,  in  substance,  that  in  the  years 
1905  and  1906,  defendant  listed  its  property  with  the  auditor 
for  taxation,  and  the  auditor  assessed  a  state  tax  thereon,  but 
the  tax  so  assessed,  together  with  the  five  per  centum,  did  not 
amount  to  seven  per  cent  of  the  gross  receipts  of  the  charter 
lines,  and  defendant,  in  each  of  said  years,  paid  into  the  treasury 
seven  percent  of  the  gross  receipts  of  said  charter  lines,  as  claimed 
and  reported  by  it. 


DEFENDANT'S  ACCOUNT  ERRONEOUS  AND  DIS- 
HONEST. 

Paragraphs  70  to  73,  inclusive,  aver,  in  substance,  that  while 
it  was  the  duty  of  defendant,  for  the  purpose  of  ascertaining  the 
gross  receipts  derived  from  the  charter  lines,  to  keep  an  accurate 
account  thereof,  for  each  semi-annual  period,  verified  by  the 
affidavits  of  its  treasurer  and  secretary,  and  furnish  the  govern- 
or a  copy  of  such  account,  the  defendant,  in  fact,  wholly  failed 
so  to  do;  that  in  pretended  compliance  with  this  duty,  it  fur- 
nished the  governor  semi-annually,  certain  documents,  purporting 
to  be  statements  of  the  gross  receipts  of  the  charter  lines,  but 
none  of  these  statements  were  copies  of  the  account,  as  required 
by  the  charter. 

Section  18  of  the  charter,  in  part,  provides: 

"And  for  the  purpose  of  ascertaining  the  proceeds,  receipts 
or  income  aforesaid,  an  accurate  account  shall  be  kept  by  said 
company,  a  copy  whereof  shall  be  furnished  to  the  governor  of 
the  State  of  Illinois;  the  truth  of  which  account  shall  be  verified 
by  the  affidavits  of  the  treasurer  and  secretary  of  such  company." 


25 

Copies  of  the  semi-annual  statements  furnished  the  governor 
are  attached  to  the  bill  as  exhibits  "3"  to  "60,"  inclusive. 

Will  your  honors  kindly  turn  to  exhibit  "3  ?"  It  is  found  on 
page  267  of  the  abstract.  The  heading  to  this  statement  is, 
"Illinois  Central  Railroad  Company.  Statement  of  Gross 
Earnings  in  Illinois  for  the  Six  months  Ending  30th  April,  1878." 
Then  follow,  under  the  classification  of  "Freight,"  "Passenger," 
"Mail",  "Express,"  "Miscellaneous,"  and  "Total,"  the  earnings 
for  the  months  of  November,  December,  January,  February, 
March  and  April — the  six  months  included  in  the  semi-annual 
period.  Then  follows  a  recapitulation  and  a  computation  of 
seven  per  cent  on  the  earnings  reported.  This  statement  shows, 
upon  its  face,  that  it  is  not  a  copy,  nor  substantially  a  copy,  of 
anything,  but  merely  a  summary  of  monthly  totals.  Below 
the  recapitulation  is  an  affidavit  by  John  C.  Welling,  auditor, 
to  the  effect  that  "the  foregoing  statement  of  gross  earnings 
derived  from  said  road  for  the  six  months  ending  30th  April, 
1878,  is  a  correct  abstract  and  statement  from  the  books  and  ac- 
counts of  said  company."  Welling's  affidavit  might  be  true  and 
the  account  itself  might  be  false.  He  swears  to  nothing  more 
than  that  the  foregoing  statement  of  gross  receipts  is  a  correct 
abstract  and  statement  from  the  books  and  accounts.   ■■•'>r3  "<.,>,•-  ■%,■■> 

All  of  these  exhibits  from  "3"  to  "60,"  inclusive,  as  to  form 
and  verification,  are  alike,  except  as  to  the  classification  of  earn- 
ings. In  the  more  recent  statements,  the  earnings  are  classi- 
fied with  greater  detail.  These  exhibits  demonstrate  that  the 
semi-annual  statements  furnished  the  governor  were  neither 
actual  copies  of  the  account,  substantial  copies  of  the  account, 
nor  partial  copies  of  the  account,  but  mere  classified  aggregates 
from  the  account. 


AVERMENTS  SUFFICIENT  TO  IMPEACH  ACCOUNT. 

Paragraphs  74  to  79,  inclusive,  impeach  the  honesty  and 
accuracy  of  these  statements  and  the  books  of  account  kept  by 
defendant. 

Paragraph  74  avers  that  each  and  every  of  said  statements 
"was  falsely  and  fraudently  made  and  was  and  is  untrue 
and  incorrect,  as  defendant  well  knew  at  the  time  such 
statement  was  made,  and  was  not  a  true  statement  of  the 
total   or   gross   proceeds,    receipts    or   income    derived   by 


26 

defendant  from  said  charter  lines  for  the  six  months  covered 
by  the  statement;  that  in  fact  and  in  truth,  as  defendant 
well  knew,  the  gross  proceeds,  receipts  or  income  derived 
from  said  charter  lines  during  each  of  the  aforesaid  periods, 
*  *  *  were  much  more  than  the  amounts  represented 
by  defendant  in  said  statements  respectively;  that  each  and 
all  of  said  pretended  statements  were  made  and  furnished 
to  the  governor  by  defendant,  and  the  amounts  of  the  gross 
receipts  were  falsely  given  therein,  as  aforesaid,  with  the 
intention  of  defrauding  your  orator  out  of  large  sums  of 
money  due  from  defendant,  out  of  the  proceeds,  receipts  or 
income  which  were  actually  derived  by  defendant  from  said 
charter  lines." 

Defendant's  counsel  insist  that  the  averments  of  this  para- 
graph amount,  in  law,  to  mere  opinion  and  conclusion.  They 
cite  many  cases  in  support  of  the  rule,  that  where  fraud  is  relied 
on,  the  facts  must  be  averred,  and  not  conclusions  deduced  there- 
from; that  facts,  well  pleaded,  are  admitted  by  a  demurrer,  but 
not  the  conclusions  drawn  by  the  pleader.  That  this  is  the  rule, 
we  do  not  dispute. 

It  is  true,  the  words  "falsely"  and  "fraudulently"  are  used 
in  this  paragraph,  and  these  words  are  expressive  of  conclusion. 
But  the  use  of  these  words  is  common  in  pleading,  and  while 
they  add  nothing,  they  detract  nothing.  Without  these  words, 
this  paragraph  is  sufhcient.  Its  averments,  in  substance,  are 
that  each  of  these  semi-annual  statements  purported  to  show 
all  of  the  receipts  received  by  defendant  from  the  charter  lines, 
for  a  given  period,  but  did  not  show  all  of  the  receipts  received  by 
defendant  from  the  charter  lines  for  such  period,  and  defendant 
knew  it  when  the  statement  was  made.  If  these  facts  are  true, 
and  under  the  demurrers  they  are  true,  these  semi-annual  state- 
ments were  knowingly  false. 

Paragraph  75  avers,  in  substance,  that  many  thousands  of 
items  of  receipts  derived  by  defendant  from  the  charter  lines 
were  wholly  omitted  from  its  account,  and  none  of  the  items  so 
omitted  were  ever  reported  and  no  per  centum  was  paid  thereon. 

The  remainder  of  these  paragraphs  aver,  in  substance,  that 
in  said  account,  defendant  knowingly  entered  hundreds  of 
thousands  of  items  of  receipts  derived  from  the  charter  lines  at 
less  than  the  actual  amounts  received,  and  that  the  differences 
between  the  items  actually  received  and  the  items  so  entered  in 


27 

said  account  were  never  reported  to  the  governor  and  no  per 
centum  was  paid  thereon ;  that  the  items  so  actually  received  by- 
defendant  and  entered  at  less  than  the  true  amounts  were  pro- 
ceeds, receipts  or  income  derived  from  the  carriage  of  freight, 
passengers,  mail  and  express,  partly  over  the  charter  and  partly 
over  the  non-charter  lines;  that  because  of  the  omission  of  these 
thousands  of  items  from  defendant's  account,  and  because  of  the 
entering  therein  of  these  hundreds  of  thousands  of  items  at  less 
than  the  true  amounts  received,  and  because  of  the  fact  that 
defendant  paid  to  the  state  a  per  centum  only  upon  the  receipts 
included  in  said  account,  it  owes  the  state  a  large  sum  of  money, 
to-wit,  the  sum  of  fifteen  million  dollars. 

Defendant's  counsel  undertake  to  wipe  out  and  annihilate  all 
of  these  averments  with  the  single  statement,  "they  are  mere 
conclusions."  They  furthermore  insist,  because  these  para- 
graphs, for  greater  certainty,  expressly  refer  to  subsequent 
paragraphs,  in  determining  the  sufficiency  of  this  bill  these 
paragraphs  themselves  should  be  utterly  ignored;  that  they  are 
nothing  but  sign-boards  pointing  somewhere  else.  I  know  of 
no  rules  which  warrant  this  assumption.  The  averments  of  one 
part  of  a  bill  are  neither  destroyed  nor  impaired  because  they 
refer  to  another  part.  Whether  or  not  the  bill  is  sufficient 
depends  upon  both  parts  taken  together.  The  averments  of 
of  these  paragraphs  are  not  mere  conclusions  and  cannot  be 
tortured  into  mere  conclusions  by  singling  out  the  words  "cheat" 
and  "defraud"  and  ignoring  the  body  of  the  paragraphs  them- 
selves. 

The  averment,  that  thousands  of  items  of  charter  line 
receipts  were  knowingly  omitted  from  defendant's  account,  is 
the  averment  of  a  fact.  The  averment,  that  defendant  actually 
received  hundreds  of  thousands  of  items  of  charter  line  receipts 
and  set  down  these  items  in  its  account  at  less  than  the  items 
actually  received,  is  the  averment  of  a  fact.  The  averment, 
that  defendant  has  paid  a  per  centum  only  upon  the  earnings 
included  in  its  account,  is  the  averment  of  a  fact.  Every  one 
of  these  facts  is  admitted  by  the  demurrers. 

The  charter  requires  the  Illinois  Central  to  keep  an  accurate 
account  of  the  total  receipts  derived  from  the  charter  lines,  and 
pay  into  the  treasury,  each  and  every  year,  at  least  seven  per 
cent  of  such  total  receipts.  If  it  be  true,  as  these  paragraphs 
aver,  that  thousands  of  items  of  charter  line  receipts  were  wholly 
omitted  from  defendant's  account;  that  hundreds  of  thousands 


28 

of  items  of  charter  line  receipts  were  knowingly  entered  in  its 
account  at  less  than  the  items  actually  received  and  no  per  cen- 
tum was  paid  thereon,  it  necessarily  results,  as  a  conclusion  of 
law,  that  defendant  is  now  indebted  to  the  state. 

The  only  objection  which  can  be  urged  to  these  paragraphs 
is,  that  the  averments  are  not  sufficiently  specific;  that  dates, 
amounts  and  the  particular  sources  of  all  the  various  items  are 
not  set  out.  But  in  view  of  the  circumstances  disclosed  by  this 
bill,  this  objection  is  frivolous. 

Defendant's  counsel  insist  the  same  rules  of  pleading  apply 
to  the  state  as  to  any  other  litigant,  and  I  agree  with  them.  We 
are  courting  no  favors  because  the  complainant  is  the  State  of 
Illinois.  They  furthermore  insist  that  under  the  ordinary  rules 
of  pleading,  it  is  not  sufficient  to  aver  in  the  bill  that  thousands 
of  items  of  the  gross  receipts  derived  by  defendant  from  the  charter 
lines  were  wholly  omitted  from  its  account,  and  hundreds  of  thou- 
sands of  items  of  such  receipts  were  credited  by  defendant,  in  its 
account,  at  less  than  the  items  actually  received,  and  then  aver 
generally  the  sources  of  these  items;  but  the  state  must  go  fur- 
ther— and  infinitely  further — and  set  out  in  the  bill  the  date, 
amount  and  particular  source  of  each  and  every  one  of  these 
hundreds  of  thousands  of  items. 

If  such  were  the  rule,  the  bill  in  this  case  would  contain 
more  pages  than  the  combined  volumes  of  the  Illinois  Reports. 
It  would  take  a  year  to  read  it.  Any  court  in  the  land,  of  its 
own  motion,  would  strike  it  from  the  files.  If  such  were  the 
rule,  the  State  of  Illinois  would  be  forever  precluded  from  having 
its  rights  under  this  charter  adjudged  in  any  court.  I  confidently 
assert  there  is  not  now,  never  was  and  never  will  be  a  rule  of 
pleading  which  works  such  results,  either  to  a  state  or  to  any 
other  litigant. 

In  view  of  the  fiduciary  relation  which  here  exists ;  in  view  of 
the  fact  that  the  transactions  involved  in  this  account  are 
peculiarly  within  defendant's  own  knowledge;  in  view  of  the 
enormity  of  this  account  and  the  multitude  of  items  embraced 
in  it,  under  any  rule  of  pleading  reasonably  applied,  the  averments 
of  these  paragraphs  are  amply  sufficient  to  make  a  prima  facie 
case,  and  nothing  more  is  required. 

Counsel  say,  in  their  brief: 

"The  charter  gives  the  governor  full  power  to  acquire  all  the 
needed    information.     The   court   judicially    knows    that   more 


29 

than  two  hundred  thousand  dollars  have  been  expended  by  the 
present  administration  for  that  purpose." 

I  will  not  say  this  is  a  sample  of  all  the  statements  of  fact 
contained  in  defendant's  printed  brief  and  argument,  but  I  will 
say  it  fairly  illustrates  the  character  of  many  of  them. 

On  March  19,  1907,  there  was  appropriated  to  the  governor, 
for  the  purpose  of  investigating  the  books  and  accounts  of  the 
Illinois  Central  Railroad  Company,  the  sum  of  $100,000.  On  the 
same  day  there  was  appropriated  to  the  attorney  general,  to 
employ  special  counsel  and  defray  other  expenses,  the  sum  of 
$50,000.  Of  the  $100,000  appropriated  to  the  governor,  there 
remained  in  the  treasury  unexpended,  on  July  1,  1909,  $83,118.10. 
This  balance  was  re-appropriated  to  the  governor  by  the  last 
general  assembly.  Of  this  balance,  there  remained  in  the  treas- 
ury, on  October  1,  1909,  over  $80,000. 

The  last  general  assembly  appropriated  to  the  attorney 
general  for  this  suit  the  further  sum  of  $50,000.  The  total 
appropriation  was  $55,000,  but  of  this  amount  $5,000  was  to  pay 
expenses  in  submerged  land  matters,  and  the  act  was  broadened 
to  include  this  purpose.  Of  this  $50,000,  not  one  cent  has  yet 
been  expended. 

The  present  administration,  instead  of  spending  more  than 
two  hundred  thousand  dollars,  has  expended,  all  told,  less  than 
seventy  thousand  dollars,  and  recent  reports  made  to  the  govern- 
or conclusively  show  that  this  money  was  well  expended. 
Most  of  the  bread  cast  upon  the  waters  of  this  investigation  has 
already  returned. 


THE  CAIRO  BRIDGE. 

Paragraphs  80  to  95  relate  to  the  Cairo  bridge  and  the  arbi- 
traries  charged  on  account  thereof.  These  paragraphs  aver, 
in  substance,  that  the  acts  of  congress  of  1872  and  1883  author- 
ized any  persons  or  corporations,  having  lawful  authority  there- 
for, to  erect  bridges  across  the  Ohio  river  for  railroad  and  other 
purposes,  which  acts  of  congress  were  duly  accepted  by  the  Chi- 
cago, St.  Louis  and  New  Orleans  Railroad  Company;  that  the 
Illinois  Central  and  said  Chicago,  St.  Louis  and  New  Orleans 
Railroad  Company  procured  the  legislature  of  Kentucky  to  pass 
an  act  authorizing  them,  jointly  or  separately,  to  build  and 
maintain  a  railroad  bridge  across  the  Ohio  river,  including  the 
necessary  approaches  and  embankments,  from  a  point  in  Ken- 


30 

tucky  opposite  the  city  of  Cairo,  Illinois,  to  any  point  in  said  city 
of  Cairo,  which  act  was  duly  accepted  by  the  Chicago,  St.  Louis 
and  New  Gleans  Railroad  Company. 

That  said  Chicago,  St.  Louis  and  New  Orleans  Railroad 
Company,  under  authority  conferred  by  the  acts  aforesaid,  and 
the  Illinois  Central  Railroad  Company,  under  the  authority  of 
its  charter  and  said  acts  of  congress,  and  during  the  year  1887, 
began  the  construction  of  said  bridge,  and  completed  and  opened 
said  bridge  for  traffic  in  the  month  of  October,  1889;  that  all 
that  part  of  said  bridge  located  east  of  the  northwestern  shore 
of  the  Ohio  river  is  within  the  state  of  Kentucky  and  the  bal- 
ance of  said  bridge  is  within  the  state  of  Illinois.  Your  honors 
will  recall  that  the  boundary  line  of  Illinois  is  not  the  center 
thread  of  the  Ohio  river,  but  the  northwestern  shore  thereof. 

These  paragraphs  further  aver  that  said  bridge  as  constructed 
was  104  feet  above  low  water  and  was  3.87  miles  in  length;  that 
the  part  of  said  bridge  which  spans  the  Ohio  river  proper  is 
about  three-fourths  of  a  mile  in  length  and  is  entirely  within  the 
state  of  Kentucky;  that  the  part  of  said  bridge  dominated  by 
defendant,  the  southeast  or  Kentucky  approach,  is  located  en- 
tirely within  the  state  of  Kentucky  and  is  about  1^  miles  in 
length;  that  the  part  of  said  bridge  dominated  by  defendant,  the 
northwest  or  Illinois  approach,  is  located  entirely  within  the 
state  of  Illinois  and  is  about  1.6  miles  in  length,  of  which  about 
one  mile  was  originally  constructed  of  wood  and  the  balance  of 
iron  and  steel;  that  the  part  so  originally  constructed  of  wood  has 
been  displaced  by  an  earth  embankment,  which  earth  embank- 
ment, at  its  northerly  end,  is  15  feet  above  the  natural  surface  of 
the  ground,  and  at  its  southerly  end,  to-wit,  at  its  point  of  con- 
nection with  the  steel  and  iron  frame  work,  is  SO  feet  above  the 
natural  surface  of  the  ground,  and  185  feet  in  width  at  its  base; 
that  said  so-called  Kentucky  and  Illinois  approaches  are  now  and 
always  have  been  integral  parts  of  said  bridge  and  so  treated  by 
defendant;  that  of  the  total  length  of  said  bridge,  about  2 J  miles 
are  in  the  state  of  Kentucky  and  about  1^  miles  are  in  the  state 
of  Illinois. 

That  the  part  of  said  bridge  within  the  state  of  Illinois  was 
constructed  by  defendant,  and  cost  the  sum  of  five  himdred 
thousand  dollars;  that  while  the  part  of  said  bridge  within  the 
state  of  Kentucky  was  ostensibly  constructed  and  paid  for  by 
the  Chicago,  St.  Louis  and  New  Orleans  Railroad  Company,  in 
truth  and  in  fact  it  was  constructed  and  paid  for  by  this  de- 


31 

fendant ;  that  at  and  prior  to  the  time  of  the  construction  of  the 
part  of  said  bridge  within  the  state  of  Kentucky,  defendant 
owned  all  of  the  capital  stock  and  bonds  of  the  Chicago,  St. 
Louis  and  New  Orieans  Railroad  Company;  that  the  total  cost 
of  the  entire  bridge  was  about  three  million  dollars,  every  dollar 
of  which  was  paid  by  defendant,  and  upon  completion  of  said 
bridge,  defendant  became,  and  is  now,  the  equitable  owner 
thereof. 

That  on  June  2,  1890  defendant  entered  into  a  pretended 
lease  with  said  Chicago,  St.  Louis  and  New  Orleans  Railroad 
Company,  whereby  said  company  pretended  to  lease  to  defendant 
the  part  of  said  bridge  within  the  state  of  Kentucky,  for  a  term 
of  392  years,  at  an  annual  rental  of  $180,000,  since  which  time 
the  defendant  has  used  and  operated  said  bridge  as  a  part  of  its 
line  of  railroad,  and  said  bridge,  in  truth  and  in  fact,  is  a  part  of 
defendant's  said  line  of  railroad:  that  all  of  the  freight,  passenger 
and  other  traffic  moving  between  the  charter  lines  and  the  non- 
charter  lines,  south  of  the  Ohio  river,  is  transported  over  said 
Cairo  bridge. 

These  paragraphs  further  aver  that  since  the  month  of  June, 
1890,  defendant  has  uniformly  deducted  an  arbitrary  charge  of 
two  cents  per  hundred  pounds  on  all  freight  of  every  kind  and 
description,  and  an  arbitran,'  charge  of  tw^enty-five  cents  for  each 
and  ever\"  passenger  transported  over  said  Cairo  bridge,  which 
arbitran,'  charges  were  credited  by  defendant  to  what  it  has 
denominated  "bridge  arbitrary,"  and  were  deducted  from  the 
aggregate  freight  and  passenger  receipts  of  the  charter  lines,  and 
the  non-charter  lines  south  of  the  Ohio  river,  before  said  receipts 
were  divided  or  apportioned  between  the  charter  and  said  non- 
charter  lines. 

That  in  making  rates  for  the  transportation  of  freight  and 
passengers,  between  points  north  and  south  of  the  Ohio  river, 
on  the  lines  of  defendant's  system,  nothing  whatever  was  in- 
cluded by  it  on  account  of  said  "bridge  arbitraries." 

That  the  total  "bridge  arbitraries"  charged  and  collected 
by  defendant  and  deducted  from  the  aggregate  receipts  of  the 
charter  and  said  non-charter  lines  as  aforesaid,  was  nearly  fifteen 
million  dollars.  A  statement  of  these  "bridge  arbitraries"  is 
set  out  in  parargaph  91.  This  statement  begins  with  the  year 
1890  (when  the  bridge  was  opened)  and  covers  the  sixteen  suc- 
ceeding years.  It  shows  the  amount  of  "bridge  arbitraries" 
collected  by  defendant  and  deducted  from  freight  and  passenger 


32 

receipts  during  each  of  said  years,  the  total  for  all  of  said  years 
being  $14,995,441.87. 

Except  the  averment  that  defendant  is  the  equitable  owner 
of  the  bridge,  each  and  all  of  the  averments  contained  in  these 
paragraphs,  up  to  paragraph  92,  are  averments  of  fact. 

In  paragraphs  92  to  94,  inclusive,  we  advance  our  theories 
as  to  the  law.  These  theories,  I  admit,  are  largely  conclusions, 
and  might  have  been  omitted.  But  because  they  were  not,  the 
bill  is  not  bad.     These  three  paragraphs  aver,  in  substance. 

First — That  defendant  had  no  right  whatever,  as  against  the 
state,  to  deduct  from  the  gross  receipts  of  the  charter  lines  any 
"bridge  arbitrary,"  or  portion  thereof,  on  account  of  said  bridge; 
that  because  of  the  equitable  ownership  of  said  bridge  by  de- 
fendant and  its  failure  to  add  said  arbitraries  to  the  rates,  the 
mileage  of  said  bridge  should  be  treated  by  it  in  the  division  of 
receipts  as  any  other  like  mileage  of  its  railroad;  that  of  the  total 
"bridge  arbitraries"  charged  and  deducted  by  defendant,  one- 
half  thereof  was  deducted  from  the  gross  receipts  of  the  charter 
lines. 

Second — That  if  it  be  held  that  the  lease  made  by  the  Chicago, 
St.  Louis  and  New  Orleans  Railroad  Company  to  defendant  is 
valid  and  binding  as  against  the  state,  and  under  said  lease 
defendant  is  entitled  to  deduct  a  "bridge  arbitrary,"  then  de- 
fendant should  credit  to  the  charter  line  receipts  such  proportion 
of  said  "bridge  arbitrary"  as  the  length  of  the  bridge  in  the 
state  of  Illinois  bears  to  the  entire  length  of  the  bridge. 

It  will  be  observed,  the  claim  of  the  state,  as  set  forth  in 
paragraphs  92  and  93  is,  that  of  the  total  sum  deducted  by  de- 
fendant from  the  through  rates,  on  account  of  "bridge  arbi- 
traries," one-half  thereof,  or  more  than  seven  million  dollars, 
was  deducted  from  what  would  otherwise  have  been  apportioned 
to  the  charter  lines;  in  other  words,  that  defendant  failed  to 
report  more  than  seven  million  dollars  of  charter  line  receipts. 
The  reason  assigned  by  defendant  for  its  failure  to  report  these 
receipts  is,  that  it  was  entitled  to  this  seven  million  dollars  as 
"bridge  arbitraries."  In  these  paragraphs  the  state  does  not 
claim  any  portion  of  the  "bridge  arbitraries"  as  such,  but  claims 
that  on  account  of  their  deduction  the  charter  lines  receipts  were 
over  seven  million  dollars  short. 

In  paragraph  94  the  claim  of  the  state  is,  that  if  the  pretended 
lease  between  the  Chicago,  St.  Louis  and  New  Orleans  Railroad 
Company  and  the  defendant  is  valid  and  binding  as  against  the 


33 

state,  then,  inasmuch  as  the  Illinois  approach,  which  constitutes 
two-fifths  of  the  bridge,  is  located  upon  the  right  of  way  of 
the  charter  lines,  two-fifths  of  the  arbitraries  charged  for  the  use 
of  the  bridge  should  be  apportioned  to  the  charter  lines. 

In  other  words,  the  state  contends  that  the  portion  of  this 
bridge  within  the  state  of  Illinois,  denominated  the  "Illinois 
Approach,"  is  a  part  of  the  charter  lines — and  this  court  has  so 
held.  (Board  EquaUzation  v.  People,  229  111.,  464.)  And  if 
a  part  of  this  bridge  belongs  to  the  charter  lines,  a  part  of  the 
receipts  derived  from  this  bridge  must  be  credited  to  the  charter 
lines. 

THE  DUBUQUE  BRIDGE. 

Paragraphs  99  to  109,  inclusive,  relate  to  the  Dubuque  bridge. 
These  paragraphs  aver,  in  substance,  that  the  Dunleith  and 
Dubuque  Bridge  Company,  an  Illinois  corporation,  acting  under 
authority  of  congress  and  the  laws  of  Illinois  and  Iowa,  con- 
structed a  railroad  bridge  across  the  Mississippi  river,  between 
the  city  of  Dubuque,  in  the  state  of  Iowa,  and  the  town  of  Dun- 
leith, in  the  state  of  Illinois,  which  said  bridge  was  opened  for 
traffic  in  1869;  that  the  authorized  capital  stock  of  said  Dun- 
leith and  Dubuque  Bridge  Company  was  one  milUon  dollars,  of 
which  three  hundred  thousand  dollars  was  subscribed  by  the 
IlUnois  Central  Railroad  Company. 

That  shortly  after  the  construction  of  said  bridge,  and  prior 
to  1878,  the  Illinois  Central  acquired,  by  purchase,  all  of  the 
capital  stock  of  said  Dunleith  and  Dubuque  Bridge  Company, 
and  thereby  became  and  now  is  the  equitable  owner  of  said 
bridge;  that  in  1867  (before  the  bridge  was  opened),  defendant 
entered  into  a  pretended  lease  with  said  Dunleith  and  Dubuque 
Bridge  Company,  whereby  said  company  pretended  to  lease  said 
bridge  to  defendant  in  perpetuity,  at  an  annual  rental  of  $150,000; 
that  since  the  completion  of  said  bridge,  defendant  has  used  and 
operated  the  same  as  a  part  of  its  line  of  railroad ;  that  all  of  the 
traffic  moving  between  the  charter  lines  and  the  non-charter 
lines,  west  of  the  Mississippi  river,  is  transported  over  said 
Dubuque  bridge. 

That  from  November  30,  1877,  to  November  30,  1899,  de- 
fendant deducted  an  arbitrary  charge  of  two  cents  per  hundred 
pounds  on  all  freight  of  every  kind  and  description,  and  an  arbi- 
trary charge  of  twenty-five  cents  for  each  passenger  transported 
over  said  Dubuque  bridge,  up  to  $150,000  a  year,  and  no  more; 

(3) 


34 

that  during  said  period,  on  the  first  day  of  January  of  each  year, 
defendant  began  making  said  deductions,  and  continued  so  to  do 
until  the  total  deduction  for  said  year  amounted  to  the  sum  of 
$150,000,  the  annual  bridge  rental  provided  in  said  lease. 

That  from  November  30, 1899,  to  October  31,  1905,  defendant 
charged  and  deducted  said  "bridge  arbitraries,"  not  only  up  to 
$150,000  a  year,  the  amount  of  the  rental,  but  upon  every  pound 
of  freight  and  upon  every  passenger  transported  over  said 
Dubuque  bridge. 

A  statement  of  the  "bridge  arbitraries  "  deducted  during 
said  last  named  period  ie  set  out  in  paragraph  105.  Will  your 
honors  kindly  turn  to  abstract  page  188?  This  statement  shows 
that  the  "bridge  arbitraries  "  deducted  during  the  first  year 
amounted  to  $290,156.16,  or  $140,000  more  than  the  total 
annual  rental  provided  in  the  lease.  During  the  last  year,  to-wit, 
from  October  31,  1904,  to  October  31,  1905,  defendant  charged 
and  deducted,  in  arbitraries,  for  the  use  of  this  bridge,  $650,139.56. 

The  capital  stock  of  the  Dunleith  and  Dubuque  Bridge  Com- 
pany, which  built  the  bridge,  was  one  million  dollars.  If  this 
bridge  cost  the  entire  amount,  during  a  single  year  covered 
by  this  statement,  defendant  charged  and  collected,  for  the 
use  of  this  bridge,  over  sixty-five  per  cent  of  its  total  cost. 
These  "bridge  arbitraries"  were  deducted  from  the  joint  receipts 
of  the  charter  lines  and  the  non-charter  lines  west  of  the  Missis- 
sippi, derived  from  traffic  which  crossed  the  bridge,  and  before 
said  receipts  were  divided  or  apportioned  between  the  charter 
and  said  non-charter  lines.  The  bill  avers  that  at  least  one-half 
of  all  these  "bridge  arbitraries"  were  deducted  from  the  receipts 
of  the  charter  lines.  Upon  these  "bridge  arbitraries"  no  per 
centum  was  paid  the  state.  Every  "bridge  arbitrary,"  there- 
fore, deducted  in  whole  or  in  part  from  the  charter  line  receipts, 
diminished  the  gross  receipts  upon  which  the  state  was  entitled 
to  a  per  centum. 

These  paragraphs  further  aver  that  since  the  month  of  Octo- 
ber, 1905,  defendant  has  annually  deducted,  in  "bridge  arbi- 
traries," only  the  sum  of  $150,000,  the  annual  rental  provided 
in  the  lease. 

The  averments  contained  in  the  remainder  of  these  para- 
graphs, up  to  paragraph  107,  with  one  or  two  exceptions,  are 
averments  of  fact  and  substantially  the^same  as  those  relating 
to  the  Cairo  bridge. 


35 

Paragraphs  107  to  109,  inclusive,  set  up  our  theory  of  the 
law,  and  are  largely  conclusions.     They  aver,  in  substance: 

First. — That  defendant  had  no  right  whatever  (for  the  rea- 
sons stated  as  to  the  Cairo  bridge)  to  deduct  said  arbitraries, 
either  in  whole  or  in  part. 

Second. — That  if  the  lease  between  defendant  and  the 
Dunleith  and  Dubuque  Bridge  Company  be  held  to  be  valid,  and 
under  said  lease  defendant  is  entitled  to  deduct  "bridge  arbi- 
traries," in  no  event  can  the  arbitraries  deducted  in  any  year 
exceed  the  sum  of  $150,000,  the  rental  reserved  in  said  lease. 


THE  BRIDGE  ARBITRARIES. 

As  affecting  the  right  to  deduct  bridge  arbitraries  from  the 
gross  receipts  of  the  charter  lines,  the  state  contends  that  the 
Illinois  Central  accomplished  nothing  by  building  these  bridges 
in  the  names  of  other  companies  instead  of  building  them  in  its 
own  name ;  that  it  accomplished  nothing  by  leasing  these  bridges 
from  companies  which  it  owned  or  controlled,  and  operating  the 
bridges  as  a  nominal  lessee;  that  it  could  not  do  indirectly  what 
it  could  not  do  directly. 

The  act  procured  from  the  state  of  Kentucky  authorized 
the  Chicago,  St.  Louis  and  New  Orleans  Railroad  Company  and 
the  Illinois  Central,  or  either  of  them,  to  build  the  Cairo  bridge. 
But  the  Illinois  Central  did  not  dare  construct  this  bridge  in  its 
own  name  and  operate  it  in  its  own  name.  It  knew  if  it  did, 
that  not  one  dollar,  either  of  expenses  for  bridge  maintenance  or 
of  arbitraries  for  bridge  use,  could  be  deducted  from  the  charter 
line  receipts.     And  the  same  was  true  of  the  Dubuque  bridge. 

How  can  this  defendant  do  under  another  name  what  it 
could  not  do  in  its  own  name?  How  can  it  deduct  bridge  arbi- 
traries from  the  gross  receipts  of  the  charter  lines  in  the  name 
of  the  Chicago,  St.  Louis  and  New  Orleans  Railroad  Company, 
when  it  could  not  deduct  them  in  the  name  of  the  Illinois  Central 
Railroad  Company?  A  court  of  equity  looks  to  the  thing  dam 
and  not  to  the  manner  in  which  it  is  done.  What  was  done  was, 
deduct  over  seven  million  dollars,  in  bridge  arbitraries,  from  the 
gross  receipts  of  the  charter  lines.  All  the  t-enefits  from  this 
transaction  accrued  absolutely  to  the  Illinois  Central;  every 
dollar  of  these  bridge  arbitraries  went  into  the  treasury  of  the 
Illinois  Central.     The  bill  so  avers  and  the  demurrers  so  admit. 


36 

Counsel  say  these  bridges  were  constructed  by  independent 
corporations  and  are  independent  concerns.  They  say  the 
Cairo  bridge  was  built  by  the  Chicago,  St.  Louis  and  New  Orleans 
Railroad  Company,  under  a  Kentucky  charter;  that  when  the 
bridge  was  completed,  the  Chicago,  St.  Louis  and  New  Orleans 
Railroad  Company,  as  it  had  a  legal  right  to  do,  leased  the  bridge 
to  the  Illinois  Central  for  the  term  of  392  years,  at  an  annual 
rental  of  $180,000;  that  the  Illinois  Central  has  operated  this 
bridge  as  the  lessee  of  an  independent  company,  and  must  be 
treated  by  the  state  precisely  the  same  as  though  it  were  an 
independent  company. 

They  say  the  Dubuque  bridge  was  built  by  the  Dunleith  and 
Dubuque  Bridge  Company,  an  independent  concern,  under 
charters  granted  by  IlHnois  and  Iowa ;  that  shortly  after  its  com- 
pletion it  was  leased  to  the  Illinois  Central  forever,  at  an  annual 
rental  of  $150,000;  that  as  to  this  bridge,  the  Illinois  Central 
must  be  treated  by  the  state  as  an  independent  bridge  company. 
This  sounds  well  when  you  hear  it,  if  it  is  all  that  you  know,  but 
when  you  know  the  facts,  it  smacks  of  farce. 

The  lease  made  by  the  Dunleith  and  Dubuque  Bridge  Com- 
pany, under  the  averments  of  this  bill,  was  simply  the  act  of  the 
Illinois  Central.  At  the  time  it  was  made,  the  IlHnois  Central 
owned  a  majority  of  all  the  capital  stock  of  this  bridge  company 
and  shortly  thereafter  acquired  the  remainder. 

The  Kentucky  part  of  the  Cairo  bridge  was  built  in  the  name 
of  the  Chicago,  St.  Louis  and  New  Orleans  Railroad  Company, 
but  the  money  was  furnished  by  the  Illinois  Central.  When 
the  bridge  was  built,  the  Chicago,  St.  Louis  and  New  Orleans 
Railroad  Company  could  not  have  raised  sufficient  funds  to  buy 
a  postage  stamp.  Its  name  could  not  have  been  found  in  any 
current  railroad  guide  in  the  United  States.  Five  years  before, 
it  had  leased  to  the  IlHnois  Central,  for  400  years,  all  of  its  proper- 
ty, rightts  and  franchises  of  every  kind  and  description,  and  the 
bill  so  avers. 

When  the  lease  was  made  by  the  Chicago,  St.  Louis  and  New 
Orleans  Railroad  Company  to  the  Illinois  Central,  the  IlHnois 
Central  owned  every  dollar  of  the  capital  stock  and  every  out- 
standing bond  of  the  Chicago,  St.  Louis  and  New  Orleans  Rail- 
road Company.  As  sole  stockholder,  it  was  sole  dictator.  Over 
the  property  and  affairs  of  the  Chicago,  St.  Loms  and  New 
Orleans  Railroad  Company  its^will  was  supreme  and  its  control 
was  absolute. 


37 

In  the  light  of  these  facts,  what  does  it  avail,  in  a  court  of 
equity,  to  invoke  legal  fictions?  What  does  it  avail  to  say  that 
in  the  transactions  involving  the  construction,  leasing  and  opera- 
tion of  the  Cairo  bridge,  the  Chicago,  St.  Louis  and  New  Orleans 
Railroad  Company  and  the  Illinois  Central  Railroad  Company 
were  independent  concerns  ? 

Under  these  leases,  the  lUinois  Central  has  simply  dealt  with 
itself.  If  it  has  paid  any  rental,  as  lessee,  it  has  paid  it  to  itself 
as  sole  stockholder  of  the  lessors.  Suppose  the  Illinois  Central 
should  refuse  to  pay  the  annual  rental  provided  in  the  Cairo 
bridge  lease,  and  the  Chicago,  St.  Louis  and  New  Orleans  Rail- 
road Company  should  bring  suit,  recover  a  judgment  for  $180,000, 
and  collect  it  from  the  Illinois  Central,  where  would  the  money 
go?  Every  dollar  would  go  back  into  the  treasury  of  the  Illinois 
Central.  The  entire  transaction,  under  these  pretended  leases, 
amounts  to  simply  this,  the  Illinois  Central  takes  money  out  of 
its  treasury  with  one  hand  and  puts  it  back  with  the  other. 
Whether  the  rental  is  paid  or  not  makes  no  difference  either  to 
the  lessor  or  to  the  lessee.  In  either  case,  at  the  end  of  the  year, 
the  result  to  both  is  precisely  the  same. 

The  only  interest  affected  or  intended  to  be  affected  by  these 
paper  transactions  was  the  interest  of  the  state.  The  only  pttr- 
pose  of  these  transactions  was  to  enable  defendant  to  do  indirectly 
what  it  could  not  do  directly. 

Counsel  sa)'",  even  if  it  were  true  that  the  Illinois  Central 
owns  all  of  the  capital  stock  of  the  Dunleith  and  Dubuque 
Bridge  Company  and  all  of  the  capital  stock  and  outstanding^ 
bonds  of  the  Chicago,  St.  Louis  and  New  Orleans  Railroad  Com- 
pany, the  Illinois  Central  is  neither  the  legal  nor  equitable  owner 
of  these  bridges ;  that  ownership  of  the  property  of  a  corporation 
cannot  be  acquired  through  ownership  of  the  capital  stock.  This 
may  be  true  in  a  technical  and  refined  sense,  but  it  is  not  in  any 
practical  sense.  The  owner  of  all  the  capital  stock  of  a  corpora- 
tion controls  absolutely  the  corporate  property,  enjoys  all  the 
benefits  accruing  therefrom,  and  in  everything  that  ownership 
implies,  is  as  much  the  real  owner  as  though  he  possessed  a 
warranty  deed. 

The  Illinois  Central,  as  the  sole  owner  of  the  capital  stock  of 
the  Chicago,  St.  Louis  and  New  Orleans  Railroad  Company,  not 
only  enjoys  all  the  profits  derived  from  the  Cairo  bridge,  but  ia 
ever5.-thing,  except  a  mere  fiction,  is  the  sole  proprietor  of  this 
bridge.     The  Illinois  Central  c.an  repudiate  the  lease  tomorrow. 


38 

refuse  to  pay  the  rent,  continue  to  use  the  bridge,  put  all  the 
earnings  into  its  own  treasury,  and  the  Chicago,  St,  Louis  and 
New  Orleans  Railroad  Company,  the  pretended  owner  and 
lessor,  can  never  utter  a  protest  unless  it  is  voiced  by  the  Illinois 
Central.  Under  such  conditions,  to  say  that  the  Chicago,  St. 
Louis  and  New  Orleans  Railroad  Company  is  the  owner  of  the 
bridge,  that  this  lease  binds  the  state  and  the  Illinois  Central 
can  treat  itself  as  an  independent  bridge  company,  sounds  like 
ironical  fiction. 

Under  the  fiduciary  relation  which  here  exists,  and  ap- 
pellee's brief  will  be  searched  in  vain  for  a  denial  of  such  relation, 
in  view  of  the  duty  resting  upon  defendant,  to  treat  the  state 
with  the  utmost  candor  and  good  faith,  in  view  of  the  fact  that 
in  the  transactions  involving  these  bridges  the  Illinois  Central 
dealt  with  itself  through  dummy  corporations  which  it  owned  and 
controlled,  these  bridge  leases,  as  affecting  the  state,  are  abso- 
lutely void.  The  true  situation  is  precisely  the  same  as  though 
the  Illinois  Central  had  built  these  bridges  in  its  own  name, 
operated  them  in  its  own  name,  collected  the  arbitraries  in  its 
own  name,  and  put  them  directly  into  its  own  treasury.  If  the 
Illinois  Central,  as  the  owner  of  these  bridges,  cannot  deduct 
these  bridge  arbitraries  in  its  own  name,  it  cannot  deduct  them 
in  the  name  of  a  dummy.  If  these  bridge  arbitraries  cannot  be 
deducted  directly  by  the  Illinois  Central,  they  cannot  be  deducted 
indirectly  for  the  Illinois  Central. 

The  whole  question  resolves  itself  into  this:  Can  the  Illinois 
Central,  as  the  real  owner  of  these  bridges,  and  for  its  own  bene- 
fit, deduct  bridge  arbitraries  from  the  gross  receipts  of  the 
charter  lines  and  avoid  the  payment  of  a  per  centum  thereon? 
If  it  can,  the  demurrer  to  this  claim  should  be  sustained.  If  it 
cannot,  the  demurrer  must  be  overruled. 

Counsel  say,  the  Cairo  bridge  cost  over  three  million  dollars; 
that  it  spans  the  Ohio  river,  a  natural  barrier  between  the  north 
and  south;  that  the  expenses  of  maintaining  this  bridge  are 
enormous ;  that  bridges  of  this  character  are  never  treated  as  ordi- 
nary railroad  mileage  by  the  Interstate  Commerce  Commission, 
but  an  allowance  is  made  for  their  maintenance  and  use.  They 
say,  furthermore,  this  bridge  was  constructed  under  a  Kentucky 
charter,  which  authorized  the  collection  of  tolls;  that  the  arbi- 
traries deducted  were  reasonable  charges  and  amounted  to 
nothing  more  than  a  fair  return  upon  the  capital  invested,  or 
ordinary  rental  for  the  use  of  the  bridge. 


39 

Whether  or  not  these  contentions  are  true  is  wholly  imma- 
terial. Neither  the  cost  of  the  bridge,  the  character  of  the  bridge, 
the  location  of  the  bridge,  nor  the  expense  of  its  maintenance, 
affects  the  question  of  the  right  of  defendant  to  deduct  bridge 
arbitraries  from  the  charter  line  receipts.  While  the  state  of 
Kentucky  could  authorize  the  collection  of  tolls  for  the  use  of 
that  part  of  the  bridge  within  its  own  territory,  neither  the  state 
of  Kentucky,  nor  any  other  power,  could  authorize  defendant  to 
deduct  these  tolls,  either  in  whole  or  in  part,  from  the  gross  re- 
ceipts of  the  charter  lines. 

If  the  Illinois  Central  can  deduct  bridge  arbitraries  from  re- 
ceipts derived  from  joint  traffic  which  crosses  the  Cairo  bridge, 
and  apportion  the  remainder  of  these  receipts  between  the 
charter  and  the  non-charter  lines,  which  means  to  deduct  a  part 
of  these  arbitraries  from  charter  line  receipts,  it  can  do  the  same 
thing  as  to  every  other  bridge  upon  its  non-charter  lines.  All  the 
defendant  will  have  to  do  is  organize  a  bridge  company,  sub- 
scribe for  the  stock,  turn  over  the  bridge  and  take  a  lease  back, 
deduct  a  bridge  arbitrary,  as  lessee,  from  the  gross  receipts  of  all 
joint  traffic  which  crosses  the  bridge,  and  divide  what  is  left 
of  the  joint  receipts  between  the  charter  and  the  non-charter 
lines.  By  extending  the  schem.e  which  is  now  applied  to  the 
Cairo  and  Dubuque  bridges,  the  expense  of  maintaining  every 
culvert  and  bridge  upon  all  of  the  defendant's  non-charter  lines, 
can  be  deducted  in  part  from  the  gross  receipts  of  the  charter 
lines. 

If  defendant,  as  the  owner  of  the  Cairo  bridge,  can  deduct 
bridge  arbitraries  for  and  on  account  of  its  maintenance  or  use 
from  the  charter  line  receipts,  it  can  do  the  same  thing  with  the 
bridge  at  La  Salle.  The  bridge  at  La  Salle  spans  the  Illinois 
river,  a  natural  barrier.  It  is  over  a  mile  long.  It  cost  a  large 
amount.  The  expenses  of  maintenance  are  heavy.  Under  the 
rule  of  the  Interstate  Commerce  Commission,  it  would  not  be 
treated  as  ordinary  track.  If  defendant,  as  the  owner  of  the 
Cairo  bridge,  can  deduct  bridge  arbitraries  from  charter  line 
receipts  and  pay  no  per  centum  to  the  state  thereon,  why  not, 
as  the  owner  of  the  La  Salle  bridge?  What  difference  does  it 
make  that  one  bridge  is  near  Cairo  and  the  other  is  near  La  Salle? 
What  difference  does  it  make  that  a  part  of  one  bridge  is  in  the 
state  of  Kentucky,  upon  a  non-charter  Une,  and  the  other  is  in 
IlUnois,  upon  a  charter  line?  The  thing  done  in  each  case  would 
be  precisely  the  same.     The  result  in  each  case  would  be  precisely 


40 

the  same,  namely,  to  minimize  the  amount  of  charter  line  re- 
ceipts, by  which  the  per  centum  of  the  state  is  measured. 

Counsel  say,  in  the  case  of  the  La  Salle  bridge,  if  an  arbitrary 
were  deducted,  it  would  make  no  difference,  because  the  state 
would  receive  a  per  centum  upon  the  bridge  earning.  This  is 
begging  the  question  and  reqmres  no  answer. 

Under  the  charter,  the  state  is  entitled  to  a  per  centum  upon 
the  gross  or  total  receipts  derived  from  the  charter  Hnes.  Until 
the  per  centum  of  the  state  is  measured,  nothing  can  be  deducted 
from  the  gross  receipts,  for  bridge  expenses,  bridge  arbitraries, 
bridge  rentals,  or  bridge  use,  either  directly  or  under  any  pre- 
tense. And  this  is  true,  regardless  of  the  character  of  the  bridge, 
where  it  is  located,  how  it  is  built,  or  under  what  authority. 

Counsel  undertake  to  argue  that  these  bridge  arbitraries  are 
not  deducted  from  the  gross  receipts  of  the  charter  lines,  but  are 
parts  of  the  through  rate  allotted  to  a  distinct  and  independent 
portion  of  the  route;  that  the  charter  lines  constitute  one  part 
of  the  through  route,  the  Cairo  bridge  constitutes  another,  and 
the  non-charter  lines  constitute  another;  that  the  through  rate  is 
distributed  between  these  parts  on  a  basis  understood  when  the 
rate  was  made,  that  the  portion  allotted  to  each  part  should 
represent  the  earnings  of  that  part.  In  other  words,  that  in 
making  the  through  rate,  the  Cairo  bridge  is  considered  as  a 
bridge  structure,  and  a  definite  part  of  the  through  rate,  to-wit, 
two  cents  a  hundred  is  allotted  to  it  as  a  bridge  earning.  It 
seems  a  little  strange  that  in  every  instance,  regardless  of  the 
length  of  the  route  or  the  amount  of  the  rate,  the  Cairo  bridge  is 
allotted  exactly  two  cents.  But  it  is  not  worth  while  to  under- 
take to  solve  the  mysteries  of  this  allotment. 

This  argument  is  based  upon  assumptions  which  the  bill 
avers  and  the  demurrers  admit  are  not  true.  The  bill  avers  that 
in  making  rates  between  points  north  and  south  of  the  Ohio 
river,  the  bridge  arbitraries  are  not  considered;  that  the  Cairo 
bridge  is  treated  and  considered  precisely  the  same  as  a  like  mile- 
age on  any  other  part  of  defendant's  system,  and  no  greater  or 
higher  rate  is  made  on  account  thereof.  Under  this  averment,  no 
part  of  the  rate  is  allotted  the  Cairo  bridge  as  a  distinct  part  of 
the  route,  because  the  bridge  is  not  treated  as  a  distinct  struc- 
ture, but  as  ordinary  mileage. 

The  bill  avers  that  these  bridge  arbitraries  were  deducted 
from  the  total  receipts  derived  from  traffic  which  crossed  the 
bridge  before  the  receipts  were  apportioned  between  the  charter 


41 

and  the  non-charter  lines ;  that  one-half  of  these  arbitraries  was 
deducted  from  the  gross  receipts  of  the  charter  lines  and  no  per 
centum  was  paid  thereon.  The  same  averments  are  made  as  to 
the  Dubuque  bridge.  In  the  face  of  these  facts,  which  are  ad- 
mitted by  the  demurrers,  what  becomes  of  a  contention  based 
upon  the  theory  that  these  bridge  arbitraries  were  not  deducted 
from  the  charter  line  receipts? 

The  defendant,  by  its  own  act,  admits  that  nearly  two  milHon 
dollars,  in  bridge  arbitraries,  were  wrongfully  deducted  from  the 
charter  line  receipts  on  account  of  the  Dubuque  bridge. 

As  heretofore  shown,  the  annual  rental  provided  in  the  pre- 
tended lease  from  the  Dunleith  and  Dubuque  Bridge  Company 
to  the  Illinois  Central  was  $150,000.  Up  to  1899,  the  Illinois 
Central  deducted,  annually,  in  bridge  arbitraries,  from  the 
through  rates,  only  the  sum  of  $150,000,  the  annual  rental  pro- 
vided in  the  pretended  lease.  Then  it  occurred  to  the  officers 
of  the  IlHnois  Central  that  if  the  state  would  stand  for  an  annual 
deduction  of  $150,000,  it  would  stand  for  more,  and  they  pro- 
ceeded to  deduct  from  the  through  rates,  without  limit,  two 
cents  for  each  one  hundred  pounds  of  freight  and  twenty-five 
cents  for  each  passenger  which  crossed  the  Dubuque  bridge. 

From  November  30,  1899,  to  October  31,  1905 — a  period  of 
six  years — the  total  arbitraries  deducted  from  the  through  rates, 
for  the  use  of  this  bridge,  amounted  to  $2,861,392.78,  or  nearly 
two  million  dollars  more  than  the  total  annual  rental  provided 
in  the  pretended  lease.  One-half  of  these  arbitraries  was  de- 
ducted from  the  gross  receipts  of  the  charter  lines,  and  upon  this 
amount  no  per  centum  was  paid  the  state. 

The  investigation  of  defendant's  account  was  begun  by  the 
governor  in  the  fall  of  1905.  In  November  of  that  year,  the 
defendant  returned  to  its  former  practice,  and  proceeded  to 
deduct,  in  bridge  arbitraries,  only  a  hundred  and  fifty  thousand, 
the  annual  rental  provided  in  the  lease,  and  account  to  the  state 
for  the  arbitraries  deducted  in  excess  of  this  amount. 

In  other  words,  the  defendant,  by  its  own  act,  admitted  that 
a  part  of  the  Dubuque  bridge  belonged  to  the  charter  lines;  that 
the  arbitraries  deducted,  for  the  use  of  the  bridge,  over  and  above 
the  annual  rental  provided  in  the  lease,  belonged  in  part  to  the 
charter  lines  as  part  owner  of  the  Dubuque  bridge,  and  that  upon 
the  charter  line's  share  of  these  bridge  arbitraries  the  state  was 
entitled  to  a  per  centum.  For  this  reason,  in  its  semi-annual 
statements,  it  accounted,  or  pretended  to  account,  for  the  state's 


42 

share  of  all  the  arbitraries  or  tolls  in  excess  of  the  rental  provided 
in  the  lease. 

Will  your  honors  kindly  turn  to  exhibit  "  59  ",  on  abstract 
page  323  ?  The  period  covered  by  this  statement  begins  Novem- 
ber 1,  1905.  The  last  item  above  the  total  is  as  follows:  "Pro- 
portion of  freight  tolls  over  Dubuque  bridge  in  excess  of  $150,000 
per  annum. "  Then  follow  the  monthly  amounts  which  aggregate 
$85,520. 

Take  exhibit  "60"  on  the  following  page.  You  find  the 
same  item.  The  total  bridge  arbitraries  or  bridge  tolls  upon 
which  the  state  received  a  per  centum  during  this  semi-annual 
period  was  $75,245.64. 

During  the  year  covered  by  these  two  semi-annual  statements, 
to-wit,  the  year  beginning  November  1,  1905 — after  this  investi- 
gation had  begun — the  total  amount  of  bridge  arbitraries  or 
bridge  tolls  deducted  from  traffic  which  crossed  the  Dubuque 
bridge,  as  against  the  state,  was  $150,000,  the  annual  rental 
provided  in  the  lease. 

If,  during  the  year  covered  by  these  statements,  the  Illinois 
Central,  as  against  the  state,  was  entitled  to  deduct,  in  bridge 
arbitraries,  only  an  amount  sufficient  to  pay  the  rental  provided 
in  the  lease,  upon  what  theory  was  it  entitled  to  deduct,  in  bridge 
arbitraries,  from  1899  to  1905,  two  million  dollars  more  than  the 
total  annual  rental  so  provided?  No  answer  will  be  found  in 
appellee's  brief,  because  there  is  none.  Furthermore,  if  the 
Illinois  Central,  as  against  the  state,  was  only  entitled  to  deduct, 
in  bridge  arbitraries,  an  amount  sufficient  to  pay  the  annual 
rental  provided  in  the  Dubuque  bridge  lease,  upon  what  theory 
was  it  entitled  to  deduct,  in  bridge  arbitraries,  eleven  million 
dollars  more  than  the  total  annual  rental  provided  in  the  Cairo 
bridge  lease? 

This  brings  me  to  the  second  contention  urged  by  the  state. 
This  contention  is  that  if  these  bridge  leases  be  held  valid  and 
binding  upon  the  state,  and  the  Illinois  Central,  as  lessee  of  these 
bridges,  is  entitled  to  deduct  bridge  arbitraries  or  tolls  on  account 
of  their  use,  that  these  arbitraries  or  tolls  are  simply  bridge 
earnings,  and  a  portion  of  these  earnings  must  be  credited  to  the 
charter  lines  because  a  part  of  these  bridges  belong  to  the  charter 
lines.  In  other  words,  that  since  the  bridges,  in  part,  belong  to 
the  charter  lines,  a  part  of  the  earnings  derived  from  the  bridges 
is  drawn  to  the  charter  lines.     As  to  the  Dubuque  bridge,  this 


43 

contention  is  admitted  by  defendant's  own  acts.  As  to  the 
Cairo  bridge,  it  is  strenuously  denied. 

Counsel  say  this  contention  is  urged  because  the  state 
recognizes  the  tincertain  and  dubious  character  of  its  other 
contention.  If  any  satisfaction  can  be  derived  from  this  sort 
of  a  statement,  so  far  as  I  am  concerned,  counsel  are  welcome 
to  it.  While  my  associates,  as  well  as  myself,  firmly  believe  that 
the  first  contention  urged  is  absolutely  sound  and  the  reasons  to 
support  it  will  appeal  to  this  court;  while  we  are  convinced 
beyond  any  doubt  that  these  bridge  leases  are  simply  devices  to 
cheat  and  defraud  the  state;  while,  to  us,  it  is  clear  as  day  that 
under  this  charter  not  one  dollar  of  bridge  arbitraries,  bridge 
rentals,  bridge  expenses,  nor  any  other  expenses,  can  be  deducted 
from  the  gross  receipts  of  these  charter  lines,  until  the  per 
centum  of  the  state  is  measured,  we  lay  no  claims  to  infallibility. 
We  recognize  the  fact  that  mistaken  judgment  is  a  possibility. 
And  because  we  do,  we  deem  it  our  duty  to  present  to  the  court 
any  and  all  contentions  which,  tmder  any  circumstances,  might 
affect  the  state's  revenue.  And  for  this  course  we  offer  no 
apologies. 

Counsel  say  the  Illinois  approach  is  simply  a  connection 
between  the  charter  lines  and  the  Cairo  bridge  and  is  no  part  of 
the  Cairo  bridge;  that  the  bill  avers  the  arbitraries  are  deducted 
for  the  use  of  the  "Cairo  bridge,"  and  not  for  the  use  of  the 
approaches;  that  since  the  Illinois  approach  is  no  part  of  the 
bridge,  the  charter  lines  are  entitled  to  no  part  of  the  arbitraries 
or  bridge  earnings. 

Their  theory  is  that  the  Cairo  bridge,  which  renders  the  en- 
tire service  for  which  an  earning  is  charged,  consists  of  the  steel 
and  iron  frame  work  which  spans  the  Ohio  river  proper.  This 
steel  and  iron  framework  rests  upon  piers  and  is  104  feet  above 
low  water  mark.  At  the  point  where  it  ends  and  the  IlHnois 
approach  begins,  this  steel  and  iron  framework  is  nearly  a  hun- 
dred feet  above  the  ground.  Without  the  Illinois  approach, 
this  steel  and  iron  framework,  set  up  in  the  air,  would  no  more 
be  a  bridge  than  would  the  statue  of  Uberty.  Without  this  ap- 
proach, it  wouldn't  earn  a  dollar  in  a  thousand  years.  A 
mountain  goat  couldn't  reach  it.  The  only  thing  that  could 
cross  it  would  be  a  bird.  And  yet  they  tell  us  the  Illinois  ap- 
proach is  no  part  of  the  Cairo  bridge. 

The  bill  avers  that  the  Illinois  approach  is  an  integral  part  of 
the  bridge  and  has  been  so  treated  and  considered  by  defendant. 


44 

Many  cases  are  cited  in  our  brief  which  squarely  and  directly  hold 
that  a  bridge  approach  is  an  integral  part  of  the  bridge  itself. 
Counsel  say  that  in  all  these  cases  both  the  bridge  and  the 
approach  were  in  the  same  state  and  were  authorized  by  a  sin- 
gle license.  What  difference  does  it  make  as  to  the  character  of 
a  structure,  under  what  authority  it  is  built,  or  whether  it  is  lo- 
cated in  one  state  or  in  two  states.  You  might  as  well  say  the 
the  Dubuque  bridge  is  not  one  bridge  because  half  of  it  is  in  Illi- 
nois and  half  is  in  Iowa,  or  because  half  of  it  was  built  under  an 
Illinois  charter  and  the  other  half  under  an  Iowa  charter. 

In  State  Board  of  EquaHzation  v.  The  People,  229  111.,  430, 
this  court  held  that  the  Illinois  approach  was  a  part  of  the 
charter  lines.  If  this  approach  is  an  integral  part  of  the  Cairo 
bridge,  as  the  bill  avers  and  the  facts  disclosed  conclusively  show, 
a  part  of  this  bridge  belongs  to  the  charter  lines,  and,  in  any 
event,  a  part  of  the  arbitraries  deducted  for  its  use  must  be 
credited  to  the  charter  lines. 


RENTALS  FROM  MOBILE  :AND  OHIO  RAILROAD. 

Paragraphs  95  to  98,  inclusive,  relate  to  rentals  received  from 
the  Mobile  and  Ohio  Railroad.  They  aver,  in  substance,  that 
defendant  leased  to  the  Mobile  and  Ohio  Railroad  Company 
certain  charter  line  facilities  in  the  city  of  Cairo,  and  also  the  use 
of  the  Cairo  bridge,  and  received  therefor,  in  rentals,  from  1898 
to  1906,  over  one  million  dollars,  no  part  of  which  rentals  was 
ever  included  in  defendant's  account  of  charter  line  receipts. 


JOINT  EARNINGS. 

Paragraphs  110  to  135,  inclusive,  relate  to  the  division  of 
joint  earnings  between  the  charter  and  non-charter  lines.  If 
any  one  question  in  this  lawsuit  is  bigger  than  the  others,  this 
is  probably  the  one.  The  real  merits  of  this  question,  however, 
are  not  now  at  issue.  When  that  issue  is  made,  the  state  will 
meet  it.  The  inquiry,  and  the  sole  inquiry,  here  is,  are  the  facts 
averred  in  these  paragraphs,  which  the  demurrers  admit,  suflEi- 
cient  in  law  to  make  a  prima  facie  case. 

Paragraph  110  avers,  in  substance,  that  for  many  years  a 
large  part  of  the  gross  receipts  derived  by  defendant  from  the 
operation  of  its  system  has  been,  and  still  is,  derived  from  the 
carriage  of  freight,  passengers,  mail  and  express  from  stations 


45 

on  its  charter  lines  to  stations  on  its  non-charter  lines,  and  from 
stations  on  its  non-charter  lines  to  stations  on  its  charter  lines, 
and  to  and  from  points  on  other  Hnes  connected  therewith ;  that 
it  was  and  still  is  the  duty  of  defendant  to  so  divide  the  receipts 
produced  jointly  by  the  charter  and  the  non-charter  lines  as  to 
yield  to  the  charter  lines  their  due  and  just  share  thereof,  to  the 
end  that  the  state  may  receive  its  per  centum  upon  all  the  gross 
proceeds,  receipts  or  income  derived  from  the  charter  lines. 
That  this  is  the  duty  resting  upon  defendant,  under  its  charter, 
is  too  plain  for  discussion. 

This  duty,  to  use  an  illustration,  means  simply  this:  If  I 
travel  from  Springfield  to  Chicago  over  the  Illinois  Central  (and 
do  not  have  a  pass) ,  I  buy  one  ticket  for  the  entire  passage.  For 
this  ticket  I  pay  the  company,  at  two  cents  a  mile,  $3.86.  In 
making  the  trip,  I  travel  from  Springfield  to  Oilman,  a  distance 
of  112  miles,  over  a  non-charter  line,  and  from  Oilman  to  Chi- 
cago, a  distance  of  81  miles,  over  a  charter  line.  The  $3.86 
received  by  the  company  for  my  ticket  is  the  joint  earning  of  a 
charter  and  a  non-charter  line.  The  state  is  entitled  to  a  per 
centum  upon  the  charter  line's  part  of  this  $3.86,  and  it  is  the 
duty  of  defendant  to  fairly  apportion  this  $3.86  between  the 
charter  and  the  non-charter  lines,  and  in  its  account  credit  to  the 
charter  line  its  full  and  fair  share  thereof,  in  order  that  the  state 
may  receive  the  per  centum  to  which  it  is  entitled  under  the 
charter.  And  what  is  true  of  this  joint  earning  is  true  of  every 
other,  both  passenger  and  freight.  No  complaint  is  made  in  the 
bill  as  to  the  division  of  joint  passenger  earnings. 


MILEAOE  BASIS  LEGAL  RULE. 

Paragraph  111  avers,  in  substance,  that  it  was  and  is  the  duty 
of  defendant  to  divide  said  joint  earnings  according  to  some  fair 
and  equitable  basis,  and  the  only  fair,  equitable  and  practicable 
method  of  division  is  according  to  mileage,  or  what  is  called  a 
"mileage  basis."  A  mileage  basis  simply  means  that  the  part  of 
the  joint  earnings  allowed  any  line  is  determined  by  the  number 
of  miles  the  traffic  actually  moves  on  such  line. 

For  instance,  suppose  a  car  of  freight  is  hauled  by  the  Illinois 
Central  from  Springfield  to  Chicago,  for  which  service  it  charges 
and  receives  $19.30.  The  non-charter  line  haul  from  Spring- 
field to  Oilman  is  112  miles.  The  charter  line  haul  from  Oilman 
to  Chicago  is  81  miles.     The  total  or  joint  haul  from  Springfield 


46 

to  Chicago,  is  193  miles.  UiK^er  the  mileage  basis,  the  $19.30 
is  divided^as  follows:  112/193,  or  $11.20,  is  credited  to  the  non- 
charter  line,  and  81/193,  or  $8.10,  is  credited  to  the  charter  line; 
in  other  words,  for  performing  this  joint  service,  the  charter  line 
is  allowed  precisely  the  same  amount,  per  mile  of  haul,  as  the 
non-charter  line.  Wherever  the  term  "mileage  basis"  or 
"mileage  pro  rate"  is  used  in  this  bill  or  during  this  argument,  it 
means  this  and  nothing  else. 

The  position  of  the  state  is,  that  where  special  facts  and  cir- 
cumstances, which  would  render  the  mileage  basis  inequitable  or 
unfair,  are  not  alleged  and  proved,  the  fair  and  equitable  method, 
and  the  only  fair  and  equitable  method,  of  dividing  joint  earnings 
is  according  to  mileage;  in  other  words,  as  a  matter  of  law,  the 
mileage  basis  is  prima  facie  the  fair  and  equitable  method  of 
dividing  joint  earnings,  and  must  be  applied.  This  precise 
question  has  only  been  passed  upon  by  the  courts  in  one  or  two 
cases.  The  reason  doubtless  is,  the  proposition  is  so  plain,  it  has 
seldom  been  questioned. 

In  the  case  of  Ackley  v.  The  Chicago,  Milwaukee  and  St.  Paul 
Railway,  36  Wis.,  252,  the  court  had  under  consideration  the 
statute  of  Wisconsin  of  1874.  This  statute  fixed  the  maximum 
charge  of  a  joint  haul  by  two  or  more  railroads,  but  made  no  pro- 
vision as  to  how  the  maximum  charge  should  be  divided  between 
the  different  roads.     The  court  said: 

"We  are  of  the  opinion  that  $15  per  car  load  is  the  highest 
rate  of  freight  that  can  lawfully  be  demanded  for  the  whole 
carriage,  and  that  the  same  should  be  divided  between  the  two 
railway  companies  on  some  equitable  principle,  to  be  determined 
by  the  court,  in  case  the  companies  invoke  the  aid  of  the  courts 
in  the  premises." 

Subsequently  the  supreme  court  of  Wisconsin  announced  and 
declared  what  the  equitable  principle  of  division,  referred  to  in 
the  Ackley  case,  was. 

In  Rood  V.  Chicago,  Milwaukee  and  St.  Paul  Railway,  43 
Wis.,  146,  the  court  said: 

"It  is  also  proper  to  say  that  the  equitable  principle  of  divi- 
sion between  railway  companies,  under  the  statute  of  1874,  where 
two  or  more  companies  carried  goods  over  their  own  roads  as  one 
carriage,  intended  by  the  court  in  Ackley  v.  Railway  Company, 
36  Wis.,  252,  was  the  distribution  pro  rata  of  the  aggregate  rates 
of  the  statute,  according  to  the  length  of  carriage  by  each  com- 
pany.    As  between  themselves,  the  companies  could  agree  upon 


47 

any  other  rule  of  distribution.  But  this  was  adopted  as  the  legal 
rule." 

The  doctrine  announced  in  this  case  is,  that  where  special 
circumstances,  evidenced  by  contract  or  otherwise,  are  not  al- 
leged and  proved,  the  mileage  basis  is  the  equitable  basis  and  con- 
stitutes the  legal  rule  for  dividing  joint  earnings.  And  I  chal- 
lenge defendant's  counsel  to  produce  a  single  case  which,  when 
fully  read  and  fairly  understood,  questions  the  doctrine  here 
announced. 

Suppose  the  Illinois  Central  receives  a  car  of  freight  at  Spring- 
field consigned  to  Moline.  The  Illinois  Central  hauls  the  car  to 
Peoria,  over  it  own  line,  and  there  delivers  it  to  the  Rock  Island 
Railroad.  The  Rock  Island  hauls  the  car  over  its  line  to  Moline, 
delivers  the  freight  to  the  consignee,  collects,  by  request  of  the 
Illinois  Central,  the  usual  and  legal  charges  for  the  entire  haul, 
and  refuses  to  settle  with  the  Illinois  Central. 

The  Illinois  Central  sues  the  Rock  Island  under  the  common 
counts,  and  the  Rock  Island  files  the  general  issue.  The  trial 
comes  on  and  a  jury  is  waived.  The  Illinois  Central  proves  it 
hauled  the  car  from  Springfield  to  Peoria,  a  distance  of  eighty 
miles,  and  there  delivered  it  to  the  Rock  Island;  that  the  Rock 
Island  hauled  the  car  from  Peoria  to  Moline,  a  distance  of  ninety- 
four  miles,  delivered  the  car  to  the  consignee,  and  under  the  usual 
custom  of  railroads,  and  by  request  of  the  plaintiff,  collected  the 
charges  for  the  entire  haul,  which  were  $20.  Thereupon  the 
plaintiff  rests  and  defendant  offers  no  testimony. 

Under  such  proof,  will  any  one  doubt  that  any  court  in  the 
land  would  render  judgment  for  the  Illinois  Central  for  such  pro- 
portion of  the  $20  as  the  length  of  the  haul  from  Springfield  to 
Peoria  bears  to  the  length  of  the  entire  haul  from  Springfield  to 
Moline?  The  reason  it  would  is,  that  when  special  circumstances 
do  not  exist,  the  mileage  basis  is  the  equitable  and  the  legal 
method  of  dividing  joint  earnings, 

I  shall,  therefore,  treat  one  proposition  as  settled,  namely, 
that  where  special  facts  and  circumstances,  which  would  render 
the  mileage  basis  inequitable  or  unfair,  are  not  averred  and 
proved,  the  mileage  basis  is  the  legal  rule  for  dividing  joint 
earnings,  and  must  be  applied. 


48 

MILEAGE  BASIS  RECOGNIZED  BY  DEFENDANT. 
The  leases  set  up  in  the  bill  conclusively  show  that  before 
the  Illinois  Central  became  the  owner  of  these  non-charter  lines, 
it  recognized  fully  the  fairness  of  the  mileage  basis.  The  lines 
west  of  the  Mississippi,  which  now  comprise  the  western  division 
of  defendant's  system,  were  formerly  leased  and  operated  by 
defendant.  One  of  these  lines  was  leased  to  defendant  in  1867 
by  the  Dubuque  and  Sioux  City  Railroad  Company.  The  lease 
is  set  out  in  the  bill. 

When  this  lease  was  made,  the  Iowa  lines  were  owned  abso- 
lutely by  the  Dubuque  and  Sioux  City  Railroad  Company,  and 
the  Illinois  Central  had  no  interest  whatever  in  this  company. 
In  making  this  lease,  the  parties  stood  at  arm's  length.  The 
rental  was  based  upon  the  gross  earnings  of  the  leased  lines.  The 
division  of  joint  earnings  was,  therefore,  of  the  utmost  impor- 
tance. Under  such  circumstances,  the  lease  provided  that  all 
the  joint  earnings  of  these  leased  lines  and  defendant's  charter 
lines  should  be  divided  according  to  mileage,  and  they  were  so 
divided  up  to  1887. 

Shortly  prior  to  the  expiration  of  this  lease,  the  Illinois 
Central  began  purchasing  the  capital  stock  of  the  Dubuque  and 
Sioux  City  Railroad  Company,  for  the  purpose  of  acquiring 
control.  Then  it  dawned  upon  the  management  of  the  Illinois 
Central  that  a  division  of  the  joint  earnings  of  the  charter  lines 
and  its  leased  lines  west  of  the  Mississippi,  upon  a  mileage  basis, 
was  not  quite  fair  to  the  leased  lines.  And  so  in  the  subsequent 
leases,  provisions  were  inserted  more  favorable  to  the  leased 
lines.  A  few  years  later,  defendant  acquired  substantially  all 
of  the  capital  stock  of  the  Dubuque  and  Sioux  City  Railroad 
Company,  namely,  78,973  shares  out  of  a  total  of  80,000  shares, 
and  thereby  became,  to  every  intent  and  purpose,  the  owner  of 
these  leased  lines. 

Defendant's  counsel  say:  "The  ownership  of  a  majority  of 
the  stock  in  the  Dubuque  and  Sioux  City  Railroad  Company  did 
not  make  defendant  that  company  nor  the  owner  of  its  property." 
This  is  true  in  a  technical  sense.  But  it  is  not  true  in  a  court  of 
equity,  which  looks  through  forms  and  behind  technicalities. 

When  defendant  acquired  ninety-eight  and  three-fourths 
per  cent  of  the  capital  stock  of  the  Dubuque  and  Sioux  City 
Railroad  Company,  it  became  the  owner  of  the  property,  rights 
and  franchises  of  that  company  in  everything  that  ownership 
implies.     From  this  time  on,  it  exercised  every  power  incident 


49 

to  absolute  ownership.  After  defendant  became  the  owner  of 
these  leased  lines,  it  was  no  longer  necessary  to  keep  a  separate 
account  of  their  earnings,  except  to  protect  the  minority  stock- 
holders of  the  Dubuque  and  Sioux  City  Railroad  Company,  and 
they  all  together  owned  less  than  one  and  one-fourth  per  cent 
of  the  capital  stock.  Of  course,  these  minority  stockholders  had 
rights.     So  has  a  lamb  when  he  sleeps  by  a  lion. 

Upon  the  earnings  of  these  leased  lines,  no  per  centum  was 
due  the  state.  From  this  time  on,  in  dividing  the  joint  earnings 
of  the  charter  lines  and  the  leased  lines  west  of  the  Mississippi, 
which  defendant  then  owned,  every  dollar  of  earnings  taken 
from  the  charter  lines  and  given  to  the  earnings  of  the  leased 
lines  meant  a  saving  to  defendant  of  at  least  seven  cents.  Then 
it  was  defendant  concluded  that  to  divide  the  joint  earnings  of 
the  charter  Hnes  and  the  leased  lines  west  of  the  Mississippi, 
upon  a  mileage  basis,  was  wrong  in  principle  and  vicious  in 
practice.  The  result  was  that  the  mileage  basis,  the  method  of 
division  provided  in  the  original  lease,  was  abandoned,  and  in 
lieu  thereof  were  substituted  the  unfair,  unequal  and  dishonest 
methods  set  out  in  the  bill. 

It  may  be  said  it  does  not  follow  that  a  mileage  basis  is  fair 
now  because  it  was  fair  thirty  years  ago;  that  conditions  have 
changed,  and  with  these  changes  new  methods  were  essential. 
Conditions  have  changed,  but  where  and  how?  In  thirty 
years,  not  a  mile  has  been  added  to  the  charter  lines,  except  the 
mileage  of  the  Cairo  bridge.  The  changes  resulting  from  ex- 
tension, growth  and  increased  population  have  all  occurred  in 
the  non-charter  lines.  Every  non-charter  line  west  of  the  Missis- 
sippi, compared  with  the  charter  lines,  is  stronger  today  than  it 
was  thirty  years  ago,  and  everybody  knows  it.  Under  such 
circumstances,  to  say  that  in  the  division  of  joint  earnings,  these 
non-charter  lines,  in  order  to  live,  must  be  given  false  and  ficti- 
tious mileage,  and  allotted  a  share  out  of  all  proportion  to  the 
service  rendered,  will  not  appeal  to  any  court. 


NO   REASONS    FOR   NOT   APPLYING   MILEAGE    BASIS. 

Paragraph  134  avers,  in  substance,  that  no  special  circum- 
stances exist  with  reference  to  any  of  the  non-charter  lines  which 
would  make  it  fair,  just  and  equitable  to  divide  the  joint  earnings 
on  any  other  basis  than  according  to  mileage. 

(*) 


50 

Counsel  say  this  averment  is  merely  a  conclusion  and  might 
as  well  have  been  omitted;  that  no  issue  can  be  joined  on  such  a 
declaration ;  "  that  what  are  special  circumstances  cannot  be  known 
until  you  know  the  facts  on  which  you  join  issue;"  that  this 
averment  may  be  a  truth,  but  is  not  the  fact  from  which  the 
truth  is  gathered  and  is  not  admissible  as  a  substitute  for  the 
averment  of  the  fact.  The  distinction  between  fact  and  truth 
was  drawn  by  Judge  Gary  in  a  gambling  case  (44  App.,  203), 
where  the  declaration  averred  that  certain  acts  constituted 
gambling.     Judge  Gary  said: 

"Without  more  knowledge  than  the  members  of  this  court 
possess  of  the  various  devices  for  gambling,  that  averment  seems 
inconsistent  with  the  facts  alleged,  and  a  bare  averment  of  a 
conclusion  is  not  good  pleading.  Facts  from  which  the  court 
can  see  that  the  conclusion  follows  should  be  stated." 

Nobody  questions  the  rule  there  announced,  but  it  does  not 
apply  to  this  averment. 

If  no  facts  and  circumstances  exist  which  render  the  mileage 
basis  inequitable  or  unfair,  what  else  can  you  do  but  so  aver,  if 
any  averment  at  all  is  needed?  An  averment  that  certain  facts, 
the  non-existence  of  which  are  essential  to  plaintiff's  case,  do  not 
exist,  is  the  averment  of  an  issuable  fact,  and  this  court  has  so 
held.  Furthermore,  where  the  subject  matter  of  such  negative 
averment  lies  peculiarly  within  the  knowledge  of  defendant,  the 
burden  of  proof,  in  that  regard,  rests  with  defendant.  (121  111., 
90.) 

Under  the  averment  of  this  paragraph,  defendant's  counsel 
will  have  no  difficulty  in  formulating  an  issue  of  fact,  if  they 
want  such  an  issue.  If  it  be  true,  as  they  insist,  that  facts  and 
circumstances  exist  which  render  the  mileage  basis,  as  applied  to 
the  charter  and  non-charter  lines,  inequitable  and  unfair,  let 
them  answer  the  bill  and  set  up  the  facts.  When  they  do,  the 
state  will  meet  them. 

Furthermore,  without  the  averment  in  paragraph  134,  that 
no  special  circumstances  exist,  the  bill  is  good.  The  mileage 
basis,  being  prima  facie  the  legal  rule  for  dividing  joint  earnings, 
the  only  averments  necessary  are:  that  joint  earnings  were 
received  by  defendant;  that  the  mileage  basis  was  not  applied 
and  loss  occurred  by  reason  thereof.  Under  such  averments, 
it  follows,  as  a  presumption  of  law,  that  the  mileage  basis — the 
legal  rule — should  have  been  applied.  If  facts  exist  which 
destroy  this  presumption,  the  defendant  must  plead  them. 


51 

Paragraph  110  avers  that  joint  earnings  were  received  by- 
defendant  from  the  charter  and  non-charter  lines,  and  paragraph 
111  avers  they  were  not  divided  according  to  mileage,  by  reason 
whereof  the  state  was  deprived  of  large  sums  of  money  to  which 
it  was  entitled  under  the  charter. 


METHODS  PRACTICED  NOT  DISCLOSED  IN 
SEMI-ANNUAL  STATEMENTS. 

Paragraphs  112  to  134,  inclusive,  set  out  in  detail  the  various 
methods  of  division  practiced  by  defendant,  and  aver  that 
because  of  the  substitution  of  these  methods  for  the  mileage 
basis,  the  charter  line  earnings  have  been  fraudulently  minimized 
and  millions  of  revenue  lost  to  the  state. 

Defendant's  counsel  insist  the  state  is  entitled  to  no  relief, 
even  if  it  be  true  that  the  methods  of  division  set  out  in  these 
paragraphs  were  inequitable  and  unfair. 

Their  argument,  in  substance,  is  that  these  methods  have 
been  practiced  by  the  defendant  for  thirty  years;  that  during  all 
this  time  semi-annual  statements  have  been  made  to  the  govern- 
ors; that  the  bill  does  not  aver  the  governors  did  not  know  of 
these  methods ;  that  there  is  no  provision  in  the  charter  nor  in  the 
statute  requiring  the  joint  earnings  of  the  charter  and  the  non- 
charter  lines  to  be  divided  upon  any  given  basis,  and  hence  a 
basis  of  division  may  be  established  by  usage  or  practical  con- 
struction; that  the  acts  of  the  various  governors  in  approving 
these  semi  annual  statements,  or  accepting  them  without  objec- 
tion, am.ovmted  to  a  deiermination  that  the  methods  practiced 
fully  complied  with  the  requirements  of  the  charter;  that  this 
determination  by  the  governors  binds  the  state  and  absolutely 
precludes  it  from  now  substituting  the  mileage  basis  or  any  other 
basis  for  the  methods  approved  by  the  various  governors. 

I  shall  later  discuss  these  semi-annual  statements  and  the 
right  of  the  governor  to  determine  what  constittites  performance 
of  defendant's  charter  obligations.  I  will  only  stop  now  to  say 
that  counsel's  entire  argument  is  based  upon  the  assumption 
that  the  governors  had  full  knowledge  of  the  methods^of ^division 
practiced  by  defendant.  The  facts  averred  in  the  bill,  which  are 
admitted  by  these  demurrers,  warrant  no  such  assumption. 

While  the  bill  contains  no  express  averment  that  the  govern- 
ors did  not  know  of  the  methods  of  division  practiced  by  defend- 


52 

» 
ant,  it  does  aver  facts  from  which  no  other  conclusion  is  war- 
ranted. 

Paragraph  162  avers,  in  substance,  that  while  it  appears  from 
the  endorsements  made  upon  some  of  the  semi-annual  statements, 
that  they  were  examined  by  the  governors,  in  truth  and  in  fact, 
prior  to  1905,  not  one  of  these  semi-annual  statements  was  ever 
verified;  that  none  of  the  governors  ever  made  an  examination 
of  the  books,  papers,  officers  or  agents  of  defendant  for  the  pur- 
pose of  verifying  and  ascertaining  the  accuracy  of  the  account. 

The  charter  empowers  the  governor  to  examine  defendant's 
books  for  one  purpose  onl}^  namely,  to  verify  and  ascertain  the 
accuracy  of  the  account.  Except  to  accompHsh  this  purpose, 
the  governor  has  no  right  Vv/^hatever  to  examine  the  books.  The 
averment,  that  none  of  the  governors  ever  examined  defendant's 
books  for  the  purpose  of  verifying  the  accuracy  of  the  account — 
the  only  purpose  for  which  an  examination  could  lawfully  be 
made — is,  in  legal  effect,  an  averment  that  no  examination  was 
ever  made. 

Under  the  facts  averred  in  the  bill,  the  only  knowledge  the 
governors  had,  or  could  have  had,  as  to  methods  of  division 
employed  by  defendant  was  that  contained  in  these  semi-annual 
statements.  And  I  challenge  defendant's  counsel  to  take  up 
any  one  of  these  semi-annual  statements  or  alleged  copies  of  the 
account,  from  1877  to  the  present  time,  and  show,  by  anything 
there  contained,  upon  what  basis,  or  according  to  what  method, 
or  in  what  manner  the  joint  earnings  of  a  charter  and  a  non- 
charter  line  were  ever  apportioned  or  divided. 

Will  your  honors  kindly  turn  to  one  of  these  semi-annual 
statements?  It  makes  no  difference  which  one  you  examine. 
Take  any  one  of  the  exhibits,  from  abstract  page  267  to  abstract 
page  325. 

What  is  there  in  these  statements  which  affords  even  a  clue 
to  the  methods  employed  in  dividing  joint  earnings?  Absolutely 
nothing.  The  non-charter  lines  are  wholly  ignored.  Joint 
earnings  are  not  mentioned.  There  is  nothing  to  show  there  were 
any.  No  traffic  expert,  however  skilled,  can  take  one  of  these 
semi-annual  statements  and  by  any  possibility  determine  or 
figure  out  what  methods  were  used  in  dividing  joint  earnings, 
or  whether  they  were  ever  divided  at  all. 

To  say,  when  a  governor  approved  one  of  these  semi-annual 
statements,  if  he  ever  did,  he  thereby  determined  that  methods 
of  division,  not  disclosed,  and  of  which  he  knew  nothing,  amount- 


53 

ed  to  a  perfomiaiice  of  defendant's  obligation,  and  this  deter- 
mination binds  the  state,  is  a  proposition  of  law  never  before 
asserted  and  probably  never  will  be  again. 


MILEAGE  BASIS  APPLIES  IN  ABSENCE  OF  SPECIAL 
CIRCUMSTANCES. 

Another  objection — and  in  fact  the  principal  objection — to 
the  application  of  the  mileage  basis  is,  that  no  facts  and  circum- 
stances are  alleged  in  the  bill  from  which  the  court  can  determine 
that  the  mileage  basis  is  equitable  and  fair  as  applied  to  the 
charter  and  the  non-charter  Hnes. 

Counsel  say,  in  their  brief: 

"The  bill  does  not  aver  any  circumstance  pertinent  to  this 
inquiry.  The  state  bases  its  claim  upon  the  averment  that  the 
mileage  basis  is  the  only  fair  basis.  Such  an  averment  is  an 
opinion  or  conclusion  not  admitted  by  the  demurrer." 

Whether  or  not  this  averment  is  a  conclusion  is  not  material. 
Whether  or  not  the  demurrers  admit  it  is  not  material.  In  th« 
absence  of  special  circumstances,  and  the  bill  avers  that  non« 
exist,  the  mileage  basis  is  the  legal  method  of  dividing  joint 
earnings  and  must  be  applied. 

Counsel  further  say : 

"In  determining  what  is  a  proper  adjustment  of  rates  as 
between  the  different  portions  of  the  system,  every  case  must 
depend  upon  its  own  circumstances.  There  are  certain  elements, 
varying  with  the  different  lines,  which  must  be  considered  in 
arriving  at  a  just  division  of  a  through  rate.  Among  the  ele- 
ments which  must  be  considered  before  it  can  be  said  that  any 
method  is  eqtiitable  and  fair  in  a  given  case  are ;  the  expense  of 
handling  the  business,  the  length  of  the  haul,  the  density  of  th« 
traffic,  the  reasonable  return  to  each  line,  and  other  elements." 

Their  argument  means,  there  is  no  method  of  division  known 
to  the  law  which  prima  facie  is  equitable  and  fair.  It  means, 
there  is  no  legal  rule  for  dividing  joint  earnings.  It  means,  if 
the  Illinois  Central  makes  a  joint  haul  with  the  C.  B.  &  Q.,  and 
the  C.  B.  &  Q.  collects  the  charge  for  the  joint  service  and  refuses 
to  account,  and  the  IlUnois  Central  goes  into  court,  proves  th« 
length  of  the  joint  haul,  the  length  of  the  haul  by  each  road,  and 
the  amount  collected  for  the  joint  service,  and  the  C.  B.  &  Q. 
makes  no  defense,  the  Illinois  Central  can  have  no  judgment. 


54 

There  never  was  and  never  will  be  a  rule  of  law  which  works  this 
result. 

We  do  not  claim  the  mileage  basis  is  an  arbitrary  rule.  What 
we  claim,  and  all  we  claim,  is  that  where  joint  earnings  have 
accrued,  in  the  absence  of  special  contract  or  circumstances 
showing  inequalities  which  affect  division,  the  mileage  basis  is 
the  equitable  and  legal  method  and  must  be  applied. 

The  bill  avers  that  millions  of  dollars  were  received  by- 
defendant  for  and  on  account  of  trafiic  which  moved  partly  over 
the  charter  and  partly  over  the  non-charter  lines.  All  of  these 
lines  are  owned  or  controlled  by  defendant,  and  are  operated  as  a 
single  system.  No  circumstances  are  disclosed  by  the  bill  show- 
ing, or  tending  to  show,  that  the  situation  is  such,  either  as  to 
the  lines  themselves  or  their  operation,  as  to  render  the  mileage 
basis — the  legal  rule — inequitable  or  unfair.  On  the  contrary, 
the  bill  expressly  avers  that  no  circumstances  exist  with  reference 
to  any  of  the  non-charter  lines  which  would  make  it  fair,  just  and 
equitable  to  divide  the  joint  earnings  on  any  other  basis  than 
according  to  mileage. 

If  this  averment  is  not  true;  if,  as  counsel  insist,  the  cost  of 
constructing  the  non-charter  lines  exceeded  that  of  the  charter 
lines;  if,  as  compared  with  the  charter  lines,  the  hauls  on  the 
non-charter  lines  are  shorter,  operating  expenses  are  higher,  the 
cost  of  maintenance  is  greater  and  traffic  is  less  dense,  these  are 
matters  of  defense,  and  under  the  rules  which  govern  pleading 
they  must  answer  the  bill  and  aver  these  facts.  They  cannot 
demur  and  simply  assert  them. 


RATE  CASES. 

Counsel  assume  the  same  facts  must  be  known  to  divide  a 
joint  earning  as  must  be  known  to  establish  a  rate.  They  say, 
in  their  brief: 

"There  is  no  distinction  between  the  factors  entering  into 
the  ascertainment  of  the  just  share  of  joint  earnings  to  be  allotted 
to  a  given  line  or  part  of  a  system  and  those  by  which  reasonable 
rates  for  such  line  or  part  ?,re  established." 

No  authorities  are  cited  in  support  of  this  contention.  They 
simply  say,  any  other  contention  is  absurd.  Thereupon  they 
cite  numerous  cases  to  show  that  before  a  rate  can  be  fixed, 
certain  factors  must  be  known.  Then  they  say,  since  these  cases 
apply  to  the  division  of  joint  earnings  as  well  as  to  the  making 


55 

of  rates,  there  is  and  can  be  no  legal  rule  for  dividing  joint  earn- 
ings. 

It  does  not  follow,  because  certain  facts  must  be  known  in 
order  to  fix  a  rate,  which  must  be  reasonable  to  be  a  rate,  that 
in  dividing  joint  earnings  already  accrued,  there  is  no  method 
which  is  prima  facie  fair.  And  the  cases  cited  do  not  so  hold. 
I  cannot  take  time  to  review  these  cases,  and  it  answers  no 
purpose  to  cull  here  and  there  an  isolated  phrase.  These  cases 
must  be  read,  not  partially,  but  fully.  What  the  courts  said 
must  be  viewed  in  the  light  of  what  the  courts  were  considering, 
and  in  nearly  all  of  these  cases  the  courts  were  considering,  not 
the  division  of  joint  earnings  already  accrued,  but  the  making  of 
rates. 

The  doctrine  announced  in  these  cases  is,  that  a  railroad  is 
entitled  to  a  fair  return  on  its  capital  invested ;  that  state  legisla- 
tures and  railroad  commissions,  both  state  and  interstate,  in 
regulating  rates,  must  keep  this  in  view;  that  in  determining 
whether  a  rate  is  reasonable,  the  cost  of  construction,  the  value 
of  the  improvements,  the  expenses  of  operation,  the  length  of  the 
hauls,  and  the  density  of  traffic  must  all  be  considered.  But 
not  one  of  these  cases  conflicts  with  the  rule  announced  by  the 
supreme  court  of  Wisconsin,  namely,  that  where  joint  earnings 
have  accrued,  in  the  absence  of  a  contract  or  proof  of  special 
facts,  the  mileage  basis  is  the  legal  rule  of  division  and  must  be 
applied.     And  this  is  all  for  which  we  contend. 


HAULS  ON  DEFENDANT'S  SYSTEM. 

Counsel  insist  the  map  of  defendant's  system  shows  that  the 
average  haul  on  the  charter  lines  is  a  long  haul,  and  the  average 
haul  on  the  non-charter  lines  is  a  short  haul,  and,  therefore,  the 
bill  itself  discloses  a  fact  which  renders  the  mileage  basis  inequita- 
ble and  unfair.  This  would  be  important  if  true.  But  the  map 
itself  warrants  no  such  assumption.  Will  your  honors  again 
turn  to  this  map?     It  follows  abstract  page  266. 

It  is  true,  some  of  the  branches  in  Illinois  (the  branches  in 
green)  are  shorter  than  either  of  the  charter  lines,  and  a  joint 
haul  over  the  entire  length  of  a  charter  line  and  one  of  these 
Illinois  branches  would  be  much  longer  over  the  charter  line. 
But  as  a  matter  of  fact,  there  are  no  such  hauls. 

Between  what  points  on  defendant's  system,  or  on  any  other 
system,   does   the  great  bulk  of  the  traffic   move?     It  moves 


56 

between  the  large  cities  located  on  the  system.  It  moves  between 
the  distributing  centers.  How  are  the  large  cities  and  distri- 
buting centers  upon  defendant's  system  located  with  reference  to 
the  movement  of  joint  traffic  over  these  charter  and  non-charter 
lines? 

The  large  cities  on  the  north  and  northwest  are  Chicago, 
Madison,  Dubuque,  Sioux  Falls,  Sioux  City,  Omaha  and  Council 
Bluffs.  The  large  cities  on  the  south  are  St.  Louis,  Cairo,  Nash- 
ville, Memphis,  Jackson  and  New  Orleans.  In  the  movement. 
of  traffic  between  these  large  cities  and  distributing  centers,  in 
nearly  every  instance,  the  long  hauls  are  over  the  non-charter 
lines. 

Take  traffic  moving  from  Chicago  to  Dubuque.  It  moves 
from  Chicago  to  Freeport,  a  distance  of  114  miles,  over  a  non- 
charter  line,  and  from  Freeport  to  Dubuque,  a  distance  of  only 
69  miles,  over  a  charter  line. 

Take  traffic  moving  between  Chicago  and  Omaha.  It  moves 
from  Chicago  to  Freeport  over  a  non-charter  line,  from  Freeport 
to  Dubuque  over  a  charter  line,  and  from  Dubuque  to  Omaha  over 
a  non-charter  line.  In  other  words,  when  traffic  moves  between 
Chicago  and  Omaha,  the  charter  line  haul  is  69  miles  and  the 
non-charter  line  haul  is  447  miles.  Whenever  traffic  moves 
between  Chicago  and  points  west  of  the  Mississippi,  the  non 
charter  line  haul  is  not  only  the  longer,  but  in  nearly  every  case 
is  many  times  the  longer. 

Take  traffic  moving  between  Chicago  and  St.  Louis  It 
moves  from  Chicago  to  Oilman  over  a  charter  line,  and  from 
Oilman  to  St.  Louis  over  a  non-charter  line.  In  other  words,  in 
the  movement  of  all  traffic  over  defendant's  system,  between 
the  two  great  distributing  centers  of  the  middle  west,  the  charte 
line  haul  is  81  miles  and  the  non-charter  line  haul  is  212  miles. 

Take  traffic  moving  from  St.  Louis  to  Cairo,  the  southern 
terminus  of  the  charter  lines.  By  the  most  direct  route  this 
traffic  moves  from  St.  Louis  to  Carbondale,  a  distance  of  94 
miles,  over  a  non-charter  line,  and  from  Carbondale  to  Cairo,  a 
distance  of  57  miles,  over  a  charter  line.  Furthermore,  as  youi 
honors  will  see  by  examining  this  map,  it  is  not  only  possible, 
but  practicable,  to  move  all  of  this  traffic  by  way  of  Mounds,  and 
whenever  so  moved,  the  charter  line  haul  is  less  than  six  miles. 

Where  traffic  moves  from  Chicago  or  Dubuque,  the  northern 
termini  of  the  charter  lines,   to   New   Orleans,   the   southern 


57 

terminus  of  the  non-charter  lines,  or  reversely,  the  long  haul  is 
over  the  non-charter  lines. 

Where  traffic  moves  between  Memphis  and  points  on  the 
charter  lines,  north  of  Centralia,  the  long  haul  is  over  the  charter 
lines ;  but  where  traffic  moves  between  St.  Louis  and  points  south 
of  the  Ohio  river,  the  long  haul,  in  every  instance,  is  over  the 
non-charter  lines. 

Where  traffic  moves  between  Chicago  and  Cairo,  if  honestly 
routed,  it  moves  entirely  over  the  charter  lines,  and  there  is  no 
joint  haul. 

You  can  point  out  instances — and  many  of  them— where 
the  charter  line  haul  is  the  long  haul.  No  one  disputes  it.  But 
a  study  of  this  map  will  conclusively  show  that  in  the  movement 
of  the  great  bulk  of  traffic  over  defendant's  system,  the  non- 
charter  line  hauls  are  the  long  hauls. 

It  is,  furthermore,  insisted  the  map  itself  shows  that  the  non- 
charter  lines  are  mere  feeders  to  the  charter  lines,  and  as  a  result 
traffic  is  more  dense  upon  the  charter  lines.  Counsel  say,  in 
their  brief: 

"An  examination  of  the  map  will  show  that  all  the  branches 
must  finally  deliver  their  traffic  to  the  charter  lines." 

This  is  true  of  traffic,  except  from  the  northwest,  which 
moves  towards  Chicago ;  but  it  is  not  true  of  traffic  which  moves 
the  other  way.     They  might  as  well  have  said : 

"An  examination  of  the  map  will  show  that  all  the  charter 
lines  must  finally  deliver  their  traffic  to  the  non-charter  lines." 

One  statement  is  just  as  true  as  the  other. 

Counsel  further  say : 

"The  non-charter  lines  are  like  the  tributaries  of  a  great 
river,  each  contributing  its  supply,  until  the  main  trunk  moves 
a  vast  body  to  the  final  destination." 

The  tributaries  of  a  great  river  flow  only  in  one  direction. 
The  trains  upon  defendant's  system  run  both  ways.  Traffic 
moves  in  all  directions.  When  it  moves  one  way,  the  non-charter 
lines  feed  the  charter  lines.  When  it  moves  the  other,  the  charter 
lines  feed  the  non-charter  lines. 

No  circumstance  is  disclosed  by  this  map  concerning  eithei 
the  length  of  the  hauls  or  the  density  of  traffic,  which  affects  the 
fairness  of  the  mileage  basis. 

If  it  be  true,  as  counsel  frequently  intimate,  that  the  non 
charter  lines  were  acquired  by  defendant  for  the  sole  purpose 
of  feeding  the  charter  lines  and  thereby  increasing  the  state's 


58 

revenue;  if  it  be  true  that  the  various  governors  knew  of  this 
philanthropic  purpose,  and  in  consideration  thereof  approved  the 
methods  practiced;  if  it  furthermore  be  true  that  these  facts 
constitute  a  defence,  the  thing  to  do  is  answer  the  bill  and  set 
them  up. 


DISHONEST  SCHEMES  OF  DIVISION. 

Paragraph  111  avers  that  since  1877  the  defendant  has  failed 
and  refused  to  divide  the  joint  earnings  of  the  charter  and  the 
non-charter  lines  according  to  the  mileage  basis  or  according  to 
any  other  fair  and  equitable  method,  but  has  invariably  so 
divided  the  said  joint  earnings  as  to  yield  to  the  charter  lines 
much  less  than  their  just  and  true  share  thereof.  The  latter  part 
of  this  paragraph  may  be  a  conclusion.  But  the  paragraphs 
which  follow  are  not  conclusions.  They  aver  facts  which  the 
demurrers  admit. 

Paragraphs  112  to  134  inclusive,  set  out  the  various  methods 
and  devices  practiced  by  defendant  in  dividing  the  joint  earnings. 
And  I  say  here  and  now  that  no  court  in  the  land  can  read  these 
paragraphs,  and  believe  them,  without  concluding,  beyond  a 
doubt,  that  for  years  the  Illinois  Central  Railroad  Company  has 
deliberately  schemed  to  defraud  the  state. 

Fifteen  different  examples  of  the  methods  of  division  practiced 
by  defendant  are  set  forth  in  these  paragraphs.     Counsel  say: 

"The  rules  are  made  as  experience  has  shown  the  traffic  to 
move,  and  should  not  be  tested  by  selected  illustrations;  until 
the  facts  are  known,  the  court  cannot  conclude  that  a  particular 
illustration  fairly  represents  the  operation  of  the  rule." 

This  is  the  onty  attempt  made  by  defendant's  counsel  to 
justify  the  methods  of  division  disclosed  in  these  paragraphs. 
In  view  of  the  character  of  the  methods,  this  is  not  surprising. 

The  examples  given  in  these  paragraphs  are  not  selected  from 
exceptional  cases.  They  are  examples  of  methods  practiced 
generally  in  the  different  divisions  of  defendant's  system.  I 
can  only  take  time  to  notice  a  few. 

One  of  the  schemes — in  fact  the  star  scheme — practiced  by 
defendant,  in  milking  the  charter  lines,  has  been  the  scheme  of 
constructive  mileage.  Constructive  mileage  means  fictitious  mileage 
It  means  padded  mileage.  It  means  miles  added,  over  which  a 
haul  was  never  made.  In  plain  English,  constructive  mileage 
means  dishonest  mileage. 


59 

It  avails  nothing  to  say  that  in  dividing  joint  earnings, 
constructive  mileage  has  been  common  among  railroads.  So  has 
rebating;  so  has  stock-watering;  so  have  other  schemes  which 
are  going  out  of  date.  A  dishonest  method  cannot  be  justified 
by  any  such  argument. 

Furthermore,  unless  the  rights  of  the  public  intervene,  two 
independent  railroads  can  divide  their  joint  earnings,  either 
fairly  or  unfairly.  The  transaction  concerns  only  themselves 
and  their  stockholders.  Under  this  charter,  the  state  of  Illinois 
is  entitled  to  a  per  centum  upon  all  the  gross  earnings  of  the 
charter  lines.  What  it  receives,  in  the  way  of  a  per  centum, 
largely  depends  upon  and  is  measured  by  the  methods  of  division 
applied  to  these  joint  earnings.  Whatever  other  railroads  may 
do  or  whatever  this  defendant  may  do,  as  concerning  itself,  as 
against  the  state,  the  methods  applied  in  dividing  these  joint 
earnings  must  be  absolutely  fair. 

The  scheme  of  constructive  mileage  practiced  by  defendant 
is  simply  this:  a  non-charter  line  is  arbitrarily  divided  into 
blocks  of  fifty  miles,  and  each  station  within  a  block,  regardless 
of  how  far  the  traffic  moves  to  reach  it,  is  given  the  entire  mileage 
of  the  block,  namely,  fifty  miles.  The  joint  earnings  are  then 
divided  upon  the  basis  of  actual  mileage  for  the  charter  line,  and 
constructive  mileage  for  the  non-charter  line.  In  other  words,  in 
dividing  the  joint  earnings,  for  the  purpose  of  swelling  the  non- 
charter  line's  share,  fictitious  miles  are  added  to  the  length  of 
its  haul. 

To  illustrate,  the  line  from  Chicago  to  Oilman  is  a  charter 
line.  The  line  from  Oilman  to  Springfield  is  a  non-charter  line. 
Under  the  scheme  of  constructive  mileage,  the  non-charter  line 
from  Oilman  to  Springfield  is  arbitrarily  divided  into  blocks  of 
fift}''  miles,  commencing  at  Oilman.  The  first  station  west  of 
Oilman  is  Ridgeville.  Ridgeville  is  five  miles  from  Oilman,  and 
is,  therefore,  five  miles  within  the  first  block.  The  second 
station  is  Thawville,  which  is  nine  miles  from  Oilman,  and  is, 
therefore,  nine  miles  within  the  first  block.  A  shipment  is  made 
from  Chicago  to  Thawville,  for  which  the  company  received  $9. 
This  shipment  is  moved  from  Chicago  to  Oilman,  a  distance  of 
eighty-one  miles,  over  a  charter  line,  and  from  Oilman  to  Thaw- 
ville, a  distance  of  nine  miles,  over  a  non-charter  line.  In  dividing 
this  joint  earning,  the  non-charter  line  is  allowed,  not  nine  miles, 
the  actual  distance  from  Oilman  to  Thawville,  but  fifty  miles, 
the  total  distance  of  the  block.     The  charter  line  is  allowed 


60 

actual  mileage,  namely,  eighty-one  miles.  The  joint  earning, 
which  is  $9,  is  divided  as  follows:  ^7i3i.  or  $3.43,  is  given  the 
non-charter  line,  and  "/lan  or  $5.57,  is  given  the  charter  line. 
If  actual  mileage  was  allowed  each  line,  in  dividing  this  $9 
earning,  90  cents  would  be  given  to  the  non-charter  line  and 
$8.10  to  the  charter  line. 

I  have  used  these  lines  as  an  illustration,  because  your  honors 
are  familiar  with  them.  No  one  will  deny  that  the  example 
given  illustrates — and  fairly  illustrates — the  principle  of  con- 
structive mileage  practiced  by  defendant.  It  may  be  said,  in 
this  example,  the  non -charter  line  haul  is  a  very  short  haul,  and 
on  account  of  the  expense  of  operation,  a  mileage  basis  would  be 
unjust.  If  it  was  true  that  when  the  charter  line  haul  was  short, 
constructive  mileage  was  allowed  to  the  charter  line  and  actual 
mileage  to  the  non-charter  line,  there  might  be  force  in  this 
contention.  But  this  is  not  true.  In  the  methods  practiced  by 
this  defendant,  no  sauce  is  ever  allowed  the  gander. 

The  bill  avers  that  for  the  past  five  years  constructive  mileage 
has  been  applied  to  the  non-charter  lines  west  of  the  Mississippi, 
As  heretofore  shown,  the  bulk  of  the  traffic  west  of  the  Mississippi 
moves  between  Chicago  and  Omaha,  Council  Bluffs,  Sioux  City 
and  Sioux  Falls.  In  every  instance  where  this  traffic  begins  or 
ends  at  Chicago,  the  charter  line  haul  is  the  short  haul,  and  in 
every  instance  constructive  mileage  is  given  the  non-charter 
lines. 

It  would  seem  that  to  divide  the  joint  earnings  of  the  charter 
lines,  and  the  non-charter  lines  west  of  the  Mississippi,  according 
to  such  a  scheme,  would  sufficiently  deplete  the  charter  line's 
share,  to  satisfy  the  maw  even  of  this  defendant.  But  such  is 
not  the  fact.  The  bill  avers,  and  the  demurrers  admit,  that 
upon  all  joint  traffic  moving  between  Chicago  and  points  west  of 
the  Mississippi,  thirty  per  cent  of  the  joint  earnings  is  arbitrarily 
taken  from  the  lines  east  of  the  Mississippi  and  given  to  the  lines 
west  of  the  Mississippi.  In  every  case,  a  part  of  this  per  centum 
is  taken  out  of  the  charter  line's  share.  When  the  volume  of 
traffic  which  moves  between  Chicago  and  the  Great  Northwest 
is  considered,  and  these  methods  are  understood,  one  reason 
appears  why  the  claims  in  this  lawsuit  aggregate  millions. 

Another  method  practiced  by  defendant,  as  set  out  in  these 
paragraphs,  is  to  allow  the  charter  lines  a  proportion  of  the  joint 
earnings,  based  on  a  through  rate,  and  the  non-charter  lines  a 
proportion,    based    on    the    local    rates.     Between    competitive 


61 

points,  every  railroad  fixes  a  through  rate.  It  is  compelled  to  do 
it  to  meet  competition.  The  through  rate  is  less  than  the  sum  of 
the  local  rates.  For  instance,  Chicago  and  Springfield  are  com- 
petitive points.  The  Illinois  Central  has  a  through  freight  rate 
between  these  points.  By  billing  a  car  from  Chicago  to  Spring- 
field, and  taking  advantage  of  this  through  rate,  you  pay  less 
than  you  would  by  billing  the  car  from  Chicago  to  Oilman  and 
rebilling  it  from  Oilman  to  Springfield.  In  other  words,  the 
through  rate  fixed  is  less  than  the  sum  of  the  two  local  rates. 

Through  freight  rates  are  fixed  by  the  Illinois  Central  between 
New  Orleans,  Jackson,  Memphis  and  other  points  south  of  the 
Ohio  river,  and  Chicago. 

The  joint  earnings  of  the  charter  and  the  non-charter  lines 
south  of  the  Ohio  river  are  divided  by  apportioning  the  through 
rates.  These  through  rates  are  not  apportioned  according  to 
the  principle  of  a  rate  pro  rate  or  any  other  equitable  principle. 
The  local  rate  south  of  the  Ohio  river,  which  is  more  than  the 
proportionate  share  of  the  through  rate,  is  allowed  the  non- 
charter  lines,  and  whatever  is  left  of  the  through  rate  is  given  the 
charter  lines. 

Under  this  scheme,  as  shown  by  the  bill,  sixty-two  per  cent 
of  the  through  rate  from  New  Orleans  to  Chicago  is  apportioned 
to  the  non-charter  lines,  south  of  the  Ohio,  and  thirty-eight  per 
cent  is  apportioned  to  the  charter  lines  north  of  the  Ohio.  The 
haul  from  New  Orleans  to  Cairo,  over  the  non-charter  lines,  is 
558  miles.  The  haul  from  Cairo  to  Chicago,  over  the  charter 
lines,  is  365  miles.  If  the  through  rate  was  divided  according  to 
miles  of  haul,  sixty  per  cent  would  be  apportioned  to  the  non- 
charter  lines,  and  forty  per  cent,  instead  of  thirty-eight  per  cent, 
to  the  charter  lines.  When  it  is  remembered  that  every  hour,  day 
and  night,  these  rates  are  applied  to  train-loads  of  freight  and  to 
monthly  traffic  which  aggregates  millions,  the  annual  loss  to  the 
charter  lines  will  be  understood.  In  apportioning  the  rates 
between  Chicago,  and  Jackson,  Grenada,  Martin,  and  other 
points  south  of  the  Ohio  river,  the  schemes  practiced  are  even 
worse. 

The  bill  avers  that  many  different  methods  of  dividing  the 
joint  earnings  between  the  charter  lines  and  the  non-charter 
lines  in  Illinois  have  been  and  are  yet  in  vogue;  that  these 
methods  have  no  uniformity,  are  governed  by  no  fixed  principles, 
are  not  applied  to  the  different  stations  on  the  same  line,  and  are 
frequently  shifted  from  one  branch  to  another.     In  some  cases 


62 

constmctive  mileage  is  allowed  the  non-charter  lines.  In  some 
cases  a  small  amount  of  fictitious  mileage  is  added  to  the  charter 
lines  and  a  large  amount  to  the  non-charter  lines.  In  cases  where 
freight  originates  on  one  non-charter  line  and  is  destined  to  points 
on  another  non-charter  line,  and  is  hauled  over  a  connecting 
charter  line,  where  the  total  haul  is  less  than  101  miles,  thirty 
per  cent  of  the  earnings  is  allowed  each  non-charter  line,  regard- 
less of  the  haul  on  the  connecting  charter  line.  In  cases  where  a 
non-charter  line  is  the  connecting  link  between  two  charter  lines, 
and  freight  is  hauled  from  a  point  on  one  charter  line  to  a  point 
on  another  charter  line  (except  junction),  a  minimum  allowance 
of  fifty  miles  is  made  to  the  non-charter  line  and  twenty-five  iniles 
to  the  charter  lines,  regardless  of  the  actual  hauls. 

Nineteen  actual  examples  are  given  showing  how  these  meth- 
ods work.     I  can  only  refer  to  one  or  two. 

In  the  month  of  August,  1899,  the  total  joint  earnings  on 
freight  between  Chicago  and  Thawville  were  $284.54.  In  divid- 
ing these  joint  earnings,  the  charter  line,  for  an  eighty-one  mile 
haul,  was  given  $133.92, and  the  non-charter  line, for  a  nine  mile 
haul,  was  given  $150.62.  In  other  words,  the  non-charter  line, 
for  a  nine  mile  haul,  was  allowed  $17  more  than  the  charter  line 
for  an  eighty-one  mile  haul.  If  the  non-charter  line  haul  had  been 
a  little  shorter  and  the  charter  line  haul  had  been  a  little  longer, 
owing  to  the  expenses  of  operation,  the  non-charter  line  would 
have  taken  it  all. 

In  the  month  of  August,  1899,  the  total  earnings  on  joint 
traffic  between  Chicago  and  all  of  the  stations  on  the  Rantoul 
division  were  $9,566.  Of  these  joint  earnings,  $3,601  were  given 
the  charter  lines,  and  $5,965  were  given  the  non-charter  lines.  In 
other  words,  only  thirty-eight  per  cent  of  these  joint  earnings  was 
allowed  the  charter  lines.  In  every  haul  which  contributed  to 
these  joint  earnings,  the  charter  line  haul  was  112  miles,  and  the 
non-charter  line  haul  in  no  instance  was  more  than  33  miles.  In 
many  cases  it  was  less  than  5  miles. 

The  nineteen  examples  given  in  these  paragraphs  were  taken 
from  a  single  month  in  the  same  year,  thereby  showing  that  all 
of  these  schemes  were  practiced  at  the  same  time  throughout 
defendant's  system.  If  the  facts  averred  in  these  paragraphs 
are  true — and  the  demurrers  admit  they  are  true — the  fair  and 
equitable,  as  well  as  the  legal,  method  of  dividing  these  joint 
earnings,  has  been  supplanted  by  fraudulent  and  dishonest 
schemes.     Through  these  schemes,   earnings  belonging  to  the 


63 

charter  lines  have  been  falsely  credited  to  the  non-charter  lines. 
Upon  these  earnings,  at  least  seven  per  centum  was  due  the 
state.  It  has  never  been  paid.  And  neither  lapse  of  time, 
neglect  of  officials,  equitable  estoppel,  practical  construction,  nor 
anything  else,  will  bar  the  state  from  recovering  its  own. 

In  People  v.  Brown,  67  111.,  438,  this  court,  in  discussing  the 
doctrine  of  estoppel,  said: 

"It  is  a  familiar  doctrine,  that  the  state  is  not  embraced 
within  the  statute  of  limitations,  unless  specially  named,  and, 
by  analogy,  would  not  fall  within  the  doctrine  of  estoppel.  Its 
rights,  revenues  and  property  would  be  at  fearful  hazard,  should 
this  doctrine  be  applicable  to  a  state.  A  great  and  overshadow- 
ing public  policy  of  preserving  these  rights,  revenues  and  property 
from  injury  and  loss  by  the  negligence  of  public  officers,  forbids, 
the  application  of  the  doctrine.  If  it  can  be  applied  in  this  case, 
where  a  comparatively  small  amount  is  involved,  it  must  be 
applied  where  millions  are  involved,  thus  threatening  the  very 
existence  of  the  government. 

"The  doctrine  is  well  settled  that  no  laches  can  be  imputed 
to  the  government,  and  by  the  same  reasoning  which  excuses  it 
from  laches,  and  on  the  same  grounds,  it  should  not  be  affected 
by  the  negligence  or  even  wilfulness  of  any  one  of  its  officials." 


CLAIMS  ABANDONED. 

Paragraph  135  relates  to  income  from  investments.  The 
theory  of  this  paragraph  is,  that  defendant,  instead  of  distrib- 
uting the  surplus  earnings  of  the  charter  lines  in  dividends, 
invested  these  earnings  in  the  stocks  and  bonds  of  other  com- 
panies; that  upon  these  investments  it  derives  income,  and, 
under  the  charter,  should  pay  the  state  a  per  centum  thereon. 

When  the  original  bill  was  filed,  I  believed  this  claim  was 
meritorious.  But,  as  Judge  Dickinson  said  in  the  court  below, 
"Since  the  first  bill  was  filed,  all  of  us  have  made  a  little  progress." 
Possibly  this  court,  after  listening  to  the  arguments  and  wading 
through  the  briefs,  will  finally  conclude  that  none  of  us  have 
made  much.  While  the  averments  of  this  paragraph  are 
probably  sufficient  to  withstand  the  demurrers,  in  my  opinion 
there  is  no  merit  in  this  claim. 

And  this  is  also  true  of  the  claims  for  a  per  centum  of  income 
derived  from  the  building  at  58  Michigan  Avenue  and  the  Chi- 
cago and  Cairo  elevators.     These  buildings  are  located  upon  de- 


64 

fendant's  right  of  way,  but  are  not  used  for  railroad  purposes, 
and,  under  the  decisions  of  this  court,  are  subject  to  general 
taxation.  These  claims  are  set  out  in  paragraphs  142,  147 
and  148. 

EXPRESS  EARNINGS. 

Paragraph  136  relates  to  the  division  of  express  earnings. 
This  paragraph  avers  that  the  fair  and  equitable  basis  of  dividing 
express  earnings  between  the  charter  and  non-charter  lines  is  to 
apportion  to  the  charter  lines  such  a  proportion  of  the  express 
earnings  of  defendant's  entire  system  as  the  express  earnings 
upon  said  charter  lines  bear  to  the  express  earnings  upon  de- 
fendant's entire  system.  This  paragraph  avers  the  state  does 
not  know,  and  is  unable  to  ascertain,  upon  what  terms  or  in  what 
amount  express  matter  is  handled  by  the  Illinois  Central. 

But  whether  its  compensation  consists  of  an  annual  rental, 
paid  by  the  express  companies,  or  a  percentage  upon  the  ex- 
press matter  hauled,  the  method  set  out  in  this  paragraph  is  the 
fair  method  of  dividing  these  joint  earnings.  Under  this  method, 
if  the  express  business  upon  the  charter  lines,  or  any  other  lines 
is  heavy,  their  share  is  large,  and  it  ought  to  be  large. 

In  other  respects,  the  averments  of  this  paragraph  do  not 
essentially  differ  from  the  former  paragraphs  relating  to  the 
division  of  freight  earnings.  What  has  been  said  as  to  the 
sufficiency  of  these  former  paragraphs  will  apply  to  paragraph 
136. 

DRAYING  AND  SWITCHING  CHARGES. 
Paragraph  137  relates  to  transfer  and  drayage  charges  in  the 
city  of  Chicago,  deducted,  either  in  whole  or  in  part,  from  the 
gross  receipts  of  the  charter  lines.  There  is  no  direct  connection 
by  rail  between  the  depots  and  freight  houses  of  defendant  and 
the  depots  and  freight  houses  of  some  of  the  other  railroads 
in  the  city  of  Chicago.  Between  these  depots  the  freight  is 
transferred  in  wagons  or  drays.  Whenever  this  is  done  by 
defendant,  the  drayage  charge  is  deducted  from  the  gross  freight 
earnings.  These  charges  are  not  collected  from  the  shipper  as  an 
extra  expense.  They  are  deducted  from  earnings  produced  by 
the  application  of  the  ordinary  and  usual  rates  and  before  the 
earnings  are  divided  between  the  charter  and  the  non-charter 
lines.  A  part  of  these  expenses  are  therefore  deducted  from 
charter  line  receipts. 


65 

Paragraph  150  relates  to  switching  charges  in  Chicago, 
where  the  places  of  business  of  consignees  are  located  upon  other 
lines,  and  involves  the  same  principal  as  the  drayage  charges. 

As  against  the  right  of  the  state  to  a  per  centum,  not  one 
dollar  can  be  deducted  from  the  gross  receipts  of  the  charter 
lines,  for  any  purpose  or  on  any  account.  Section  IS  of  the 
charter  provides  that  the  company  shall  keep  an  accurate 
account  of  the  gross  or  total  proceeds,  receipts  or  income  derived 
from  the  charter  lines,  and  pay  the  state  a  per  centum  thereon. 
Broader  language  could  not  have  been  employed,  and  its  meaning 
is  too  plain  to  be  misunderstood. 

"Gross  or  total  receipts  "  mean  ever}'thing  received;  not 
ever}-thing  received,  less  something  taken  out.  To  deduct  these 
expenses,  or  any  other  expenses,  from  the  joint  receipts  of  the 
charter  and  non-charter  lines,  apportion  the  remainder  between 
these  lines  and  pay  a  per  centum  upon  the  charter  lines'  share  of 
such  remainder,  means  to  pay  a  per  centum,  not  upon  the  charter 
lines'  share  of  the  gross  receipts,  but  upon  the  charter  lines' 
share  of  the  net  receipts.  And  no  sort  of  logic,  however  refined, 
can  avoid  this  conclusion. 

Whether  or  not  it  was  expedient  or  necessary  to  incur  these 
expenses  to  meet  competition  and  get  business  is  wholly  imma- 
terial, and  I  shall  not  discuss  it. 

Counsel  say,  in  their  brief: 

"While  defendant  cannot  deduct  any  expense  attending  the 
transportation  of  a  shipment  over  the  charter  lines,  these  allow- 
ances are  not  of  that  character.  They  are  made  to  another 
company  for  transportation  on  its  road  or  drays.  The  state  fails 
to  distinguish  between  an  allowance  to  another  company  for 
transportation  upon  its  rails  or  drays  and  expenses  attending 
the  movement  of  the  traffic  over  defendant's  lines.  The  dis- 
tinction is  a  simple  one." 

The  distinction  is  also  a  meaningless  one.  Under  the  char- 
ter, the  state's  per  centum  must  be  computed  upon  and  measured 
by  the  total  amount  of  the  gross  receipts.  Until  the  per  centum 
is  so  measured,  nothing  whatever  can  be  taken  from  the  gross 
receipts.  Whether  these  draying  and  switching  charges  were 
expenses  incurred  in  moving  traffic  over  the  charter  lines  or  were 
allowances  made  to  other  companies  amounts  to  nothing.  The 
question,  and  the  only  question,  is,  were  these  expenses,  or 
allowances,  or  whatever  they  may  have  been,  deducted |from 
the  gross  receipts  derived  from  the  charter  lines?     If  they  were 


66 

so  deducted,  the  amount  of  per  centum  paid  the  state  was  com- 
puted and  based,  not  upon  gross  receipts,  but  upon  net  receipts. 
If  they  were  so  deducted,  the  standard  fixed  by  the  charter  itself 
to  measure  the  amount  of  the  state's  revenue  was  changed  by  this 
defendant. 

Counsel,  in  their  brief,  undertake  to  show  that  these  draying 
and  switching  charges  were  not  deducted  from  gross  receipts 
derived  from  the  charter  lines.  Their  contention,  in  substance, 
is  that  the  state  is  only  entitled  to  a  per  centum  of  amounts 
actually  earned  upon  the  charter  lines;  that  these  draying  and 
switching  charges  were  not  deducted  from  any  earning  which 
accrued  to  the  charter  lines  for  any  service  performed  thereon, 
but  from  an  earning  which  accrued  to  another  company  on 
account  of  a  distinct  and  independent  service;  that  while  defend- 
ant collected  only  the  usual  charges  for  transportation  over  its 
own  lines,  as  a  matter  of  fact,  a  part  of  these  charges  \vas  not 
collected  for  transportation  on  the  charter  lines,  but  to  pay  other 
companies  for  draying  and  switching,  and  was  therefore  no  part 
of  the  gross  receipts  of  the  charter  lines. 

This  contention,  like  many  others  strenuously  urged  in 
appellee's  brief,  assumes  that  the  facts  averred  in  the  bill  are 
not  true.  It  assumes  that  upon  the  argument  of  a  demurrer, 
you  can  ignore  averments  admitted  by  the  demurrer.  It  assumes 
that  whole  paragraphs  can  be  brushed  aside  and  held  for  naught 
by  simply  asserting  "they  are  merely  conclusions." 
Paragraph  137  contains  this  averment: 

"  that  said  freight     *    *    *    was  delivered    *    *    *     by  wag- 
ons, drays  and  other  vehicles,  and  for  all  of  such  freight 
so  delivered     *    *    *    the  defendant  paid  the  cost  of  drayage 
thereof,  from  and  out  of  the  gross  or  total  proceeds,  receipts 
or  income  of  said  charter  lines;  that  the  cost  of  such  drayage 
was  not  considered  in  the  charges  made  by  said  defendant 
nor  was  the  cost  of  such  drayage  added  to  the  cost  of  trans- 
portation of  such  freight  from  said  city  of  Chicago  to  its 
destination ;  that  the  amount  so  paid  out  of  the  gross  receipts 
of  said  charter  lines  and  deducted  therefrom  for  such  drayage 
was,  to-wit,  two  million  dollars,  and  upon  said  sum  no  per 
centum  was  paid  the  state." 
Paragraph    150   avers   that   switching   charges,   aggregating 
five  million  dollars,  incurred  under  precisely  the  same  circum- 
stances, were  deducted  from  and  out  of  the  gross  receipts  of  the 
tharter  lines,  and  that  no  per  centum  was  paid  the  state  upon 


67 

said  five  million  dollars,  or  any  part  thereof.  These  avermente 
are  not  conclusions.     It  is  idle  to  so  contend. 

The  averment,  that  these  draying  and  switching  charges 
were  neither  added  to  the  ordinary  rates  for  transportation  over 
defendant's  lines  nor  considered  in  making  the  rates,  is  the  aver- 
ment of  a  fact. 

The  averment,  that  draying  charges  to  the  amount  of  two 
million  dollars  and  switching  charges  to  the  amount  of  five 
million  dollars  were  paid  from  and  out  of  the  gross  receipts  of  the 
charter  lines,  is  the  averment  of  a  fact. 

The  averment,  that  no  per  centum  was  paid  the  state  upom 
the  amounts  so  deducted  from  the  gross  receipts,  is  the  averment 
of  a  fact.  And  every  one  of  these  facts  is  admitted  by  the 
demurrers. 

It  is  not  worth  while,  upon  this  argument,  to  discuss  a  theory 
based  upon  the  assumption  that  these  averments  are  not  true. 
When  they  answer  the  bill  and  deny  these  averments ;  when  the 
time  comes,  if  it  ever  does,  that  any  facts  are  before  the  court 
which  even  remotely  support  such  a  theory,  it  will  be  time  enough 
for  the  state  to  meet  it. 


NEWSPAPER  ADVERTISING. 

Paragraph  141  relates  to  newspaper  advertising.  It  avers, 
in  substance,  that  between  1877  and  1906,  defendant,  in  the 
operation  of  its  railroad,  incurred  large  expenses  to  divers 
newspapers  for  and  on  account  of  printing  and  advertising,  and 
deducted  these  expenses,  to  the  amount  of  more  than  one  million 
dollars,  from  the  gross  earnings  of  the  charter  lines;  that  no  per 
centum  was  paid  the  state  upon  the  amount  so  deducted  from 
said  gross  earnings. 

These  expenses  were  deducted  in  a  round-about  way,  but 
they  were  nevertheless  deducted  from  the  gross  earnings  of  the 
charter  lines,  and  the  facts  averred  in  this  paragraph  so  show. 
Mileage  books  were  issued  to  the  newspapers  to  pay  for  this 
advertising.  These  mileage  books  were  used  upon  the  charter 
Unes.  Whenever  they  were  so  used,  the  charter  lines  performed 
a  service  on  account  of  which  an  earning  accrued.  The  amount 
of  the  earning  was  the  value  of  the  mileage  used.  But  no  earning 
were  credited  to  the  charter  lines  on  account  of  the  use  of  these 
mileage  books.  They  were  credited  to  advertising.  The  result 
was,  the  actual  earnings  of  the  charter  lines  were  short  by  pr&- 


68 

cisely  the  amount  of  the  mileage  used.     The  bill  avers  the  total 
value  of  the  mileage  used  was  over  one  million  dollars . 

What  has  been  said  as  to  draying  and  switching  charges 
appHes  also  to  this  claim,  and  I  shall  not  take  time  to  discuss 
it  further. 

FREE  USE  OF  CHARTER  LINE  PROPERTY. 

Paragraphs  138,  143,  145  and  146  relate  to  the  free  use  of 
charter  line  property  and  charter  line  services  by  the  non-charter 
lines.  These  paragraphs  aver  that  all  the  engines  and  cars  owned 
by  defendant  belong  to  and  are  a  part  of  the  charter  line  equip- 
ment; that  the  depot,  freight  houses  and  terminal  facilities  in 
the  city  of  Chicago,  and  all  depots,  switch  tracks  and  sidings  at 
junction  points  between  the  charter  and  the  non-charter  lines, 
outside  of  Chicago,  are  the  absolute  property  of  the  charter  lines. 

Paragraph  138  avers,  in  substance,  that  since  1877  the 
defendant  has  hauled  and  transported  over  the  charter  lines 
large  quantities  of  coal,  iron  and  other  materials  and  supplies 
for  the  sole  use  and  benefit  of  the  non-charter  lines,  without 
making  any  charge  against  the  non-charter  lines  therefor  and 
without  crediting  to  the  charter  lines  any  earnings  on  account 
thereof;  that  it  was  the  duty  of  defendant  to  credit  to  the  charter 
lines,  for  and  on  account  of  such  service,  the  usual  and  ordinary 
earnings  which  would  have  accrued  to  the  charter  lines  had  the 
service  been  rendered  to  a  foreign  railroad  in  which  defendant 
had  no  interest ;  that  if  this  had  been  done,  earnings  to  the  amount 
of  ten  million  dollars  would  have  been  credited  to  the  charter 
lines  for  and  on  account  of  such  service.  The  latter  part  of  this 
paragraph  avers  as  follows: 

"But  your  orator  sa3^s  that  the  defendant,  for  the  purpose 
of  minimizing  and  reducing  the  gross  or  total  proceeds,  receipts 
or  income  of  its  charter  lines,  and  of  cheating  and  defrauding 
your  orator,  wholly  failed  and  neglected  to  credit  to  the  amount 
of  the  gross  or  total  proceeds,  receipts  or  income  of  said  charter 
lines  any  amount  whatever  for  and  on  account  of  said  services 
so  rendered  for  the  sole  use  and  benefit  of  its  non-charter  lines, 
and  wholly  failed  and  neglected  to  include  in  any  statement  of 
the  gross  or  total  proceeds,  receipts  or  income  of  said  charter 
lines,  any  amount  whatever  for  and  on  account  of  said  services 
so  rendered,  and  never  paid  to  your  orator  any  per  centum  on 
the  amount  which  should  have  been  so  credited,  or  any  part 
thereof." 


69 

Paragraph  143  avers,  in  substance,  that  the  engines  and  cars 
belonging  to  the  charter  Hnes  have,  from  time  to  time,  been 
devoted  to  the  sole  and  exclusive  use  of  the  non-charter  lines, 
and  no  earnings  whatever  have  been  credited  to  the  charter 
lines  on  account  thereof;  that  if  the  usual  and  ordinary  charges 
had  been  made  for  said  engines  and  cars,  earnings  to  the  amount 
of  three  million  dollars  would  have  been  credited  to  the  charter 
Hnes. 

Paragraph  145  relates  specially  to  charter  line  facilities  in 
the  city  of  Chicago.  It  avers,  in  substance,  that  since  1889 
defendant  has  permitted  the  Chicago,  Madison  and  Northern 
Railroad,  one  of  its  non-charter  lines  which  terminates  at  Chi- 
cago, to  use,  free  of  charge,  all  the  terminal  facilities  of  the 
charter  lines  in  the  city  of  Chicago,  consisting  of  the  passenger 
depot  at  12th  street,  the  suburban  depots  north  thereof,  the 
freight  house  at  Randolph  street,  all  storage,  transfer  and  cleaning 
yards,  the  round  house  and  shops,  the  team  tracks  and  switching 
tracks,  together  with  all  clerical  services  used  in  or  about  the 
employment  of  said  facilities;  that  the  fair  and  reasonable 
compensation  for  the  use  of  said  terminal  facilities  by  said  non- 
charter  line,  from  1889  to  1906,  was  $2,140,000. 

Paragraph  146  avers,  in  substance,  that  the  depots,  side- 
tracks, terminal  facilities  and  office  equipment  at  junctions  be- 
tween the  charter  and  the  non-charter  lines,  outside  of  Chicago, 
are  the  property  of  the  charter  lines ;  that  all  of  this  charter  line 
property  has  been  used  by  the  non-charter  lines  free  of  charge; 
that  if  a  fair  and  reasonable  rental  had  been  charged  the  non- 
charter  lines  for  the  use  of  this  property,  an  earning  of  one  mil- 
lion, five  hundred  thousand  dollars  would  have  been  credited 
to  the  charter  lines  on  account  thereof. 

The  claims  set  out  in  these  four  paragraphs  involve  the  same 
question,  namely,  the  right  of  defendant,  as  against  the  state,  to 
devote  the  charter  lines  to  the  use  and  benefit  of  the  non-charter 
lines,  without  crediting  to  the  charter  lines  any  earnings  on  ac- 
count thereof. 

Counsel  say,  the  charter  obligation  of  defendant  is  to  pay  a 
per  centum  only  upon  the  gross  proceeds,  receipts  or  income 
derived  from  the  charter  lines;  that  even  if  an  earning  accrued 
to  the  charter  lines  on  account  of  these  services,  no  earning  was 
collected  and  nothing  in  fact  was  received  by  defendant  for  such 
services;  that  since  this  is  true,  neither  proceeds,  receipts  nor 
income,  within  the  meaning  of  the  charter,  were  received  by 


70 

defendant,  to  which  a  per  centum  could  apply.  If  this  conten- 
tion is  sound,  all  the  defendant  need  do  to  wipe  out  the  state's 
revenue  is  acquire  a  few  more  non-charter  lines  to  whose  use  and 
for  whose  benefit  the  charter  lines  can  be  devoted. 

Counsel  further  say  the  state  is  not  the  proprietor  of  defend- 
ant's railroad  and  has  nothing  to  say  concerning  its  use ;  that  it 
stands  in  the  same  relation  as  the  holder  of  an  income  bond 
secured  by  mortgage ;  that  the  control  and  management  of  these 
charter  lines  were  comnriitted  to  a  board  of  directors,  vested  with 
full  and  absolute  power,  and  this  board  of  directors  can  do  what 
it  pleases. 

What  are  the  powei-s  of  this  board  of  directors?  Section  7 
of  the  charter,  after  authorizing  the  directors  to  execute  certain 
powers  pertaining  to  the  construction  of  the  road  and  the  trans- 
portation of  persons  and  merchandise  thereon,  provides  as  follows : 
"with  all  such  powers  and  authority  for  the  control  and 
management  of  the  affairs  of  said  company  as  may  be 
necessary  and  proper  to  carry  into  full  and  complete  effect 
the  meaning  and  intent  of  this  act." 

The  intent  of  this  act,  as  repeatedly  announced  by  this  court, 
■^as  to  aid  in  the  construction  of  a  railroad,  and  through  its  oper- 
ation, secure  to  the  state,  for  all  time,  an  abundant  and  unfailing 
supply  of  revenue.  No  powers  were  granted  the  board  of 
directors — and  none  exist — the  exercise  of  v.^hich  will  defeat  this 
intent. 

If,  as  against  the  state,  the  board  of  directors  can  devote  the 
engines,  cars,  tracks  and  facilities  of  the  charter  lines,  free  of 
charge,  to  the  non-charter  lines,  in  one  case,  it  can  do  it  in  every 
case.  If  it  can  do  it  for  one  day,  it  can  do  it  for  one  year.  This 
means,  the  charter  lines  can  be  operated  solely  for  the  benefit  of 
the  non-charter  lines,  and  without  paying  the  state  one  dollar  in 
per  centum. 

Our  contention  is,  that  for  the  purpose  of  an  accounting,  the 
non-charter  lines  are  distinct  and  independent  lines  and  must  be 
so  treated ;  that  whenever  a  service  is  rendered  to  the  non-charter 
Hnes,  for  which  a  charge  w^ould  be  made  to  any  other  road,  an 
earning  accrues  to  the  charter  lines;  that  whenever  an  earning 
accrues  to  the  charter  lines,  it  is  the  duty  of  defendant  to  credit 
such  earning,  in  its  account,  and  pay  the  state  a  per  centum 
thereon,  and  a  failure  to  do  it  is  a  fraud  upon  the  state.  Any 
other  construction  puts  it  within  the  power  of  defendant  to  de- 
feat the  very  purpose  and  intent  of  this  charter. 


71 

These  paragraphs  aver  that  the  engines,  cars,  eqtiipment  and 
terminal  facilities  of  the  charter  lines  have  been  appropriated  by 
and  used  for  the  benefit  of  the  non-charter  lines ;  that  no  earnings 
whatever  were  credited  to  the  charter  lines  on  account  of  such 
use ;  furthermore,  they  aver  the  fair  and  reasonable  value  of  such 
use. 

If  these  averments  are  true — and  the  demurrers  admit  they 
are — this  defendant  has  failed  to  credit  to  the  charter  lines  mil- 
lions of  earnings  which  actually  accrued,  and  upon  which  the 
state  was  entitled  to  a  per  centum,  and  every  dollar  in  per 
centum  which  was  lost  to  the  state  increased  the  revenues  of 
defendant's  system.     From  such  facts  the  law  presumes  fraud. 

It  avails  nothing  upon  this  argument  to  discuss  the  practice 
of  railroads.  So  far  as  this  court  now  knows,  or  can  know,  none 
exists.  If  a  practice  exists  of  interchanging  cars,  handling  sup- 
plies without  cost,  or  providing  facilities  free  of  charge,  and  de- 
fendant desires  to  rely  upon  it,  it  must  answer  the  bill  and  set  up 
the  practice.  It  cannot  demur,  admit  the  averments  contained 
in  the  bill,  and  then  impeach  the  averments  admitted,  with  a 
custom  vouched  for  by  its  counsel.  The  sufficiency  or  insuffi- 
ciency of  this  bill  must  be  determined  by  the  facts  averred  in  it, 
and  not  by  the  practices  said  to  exist. 

Counsel  say,  in  their  brief : 

"The  use  was  more  than  offset  by  the  addition  to  charter  line 
business.  The  practice  has  resulted  in  great  benefit  to  the  state, 
as  is  shown  by  a  comparison  between  exhibit  '3'  and  exhibit  '59,' 
from  which  it  will  appear  that  the  semi-annual  payment  to  the 
state  has  increased  from  $151,229.54,  made  for  the  six  months 
ending  April  30,  1878,  to  $592,322.46,  made  for  the  six  months 
ending  April  30,  1906." 

The  amount  of  the  state's  per  centum  is  measured  by  the 
amount  of  the  charter  line  earnings  which  are  credited  in  de- 
fendant's semi-annual  accounts.  How  a  failure  to  credit,  in 
these  accounts,  charter  line  earnings  which  actually  accrued,  in- 
creased the  amount  of  the  state's  per  centum,  is  not  verj'-  clear. 

Counsel  further  say : 

"The  non-charter  lines  pour  their  traffic  into  the  charter 
lines;  the  terminals  and  junction  facilities  of  the  latter  are  used  in 
common  to  prosper  the  general  result." 

Whether  the  charter  and  non-charter  lines  are  treated  by 
defendant  as  one  system  or  as  independent  lines  depends  alto- 
gether on  "whose  ox  is  gored."     In  dividing  joint   earnings, 


72 

the  defendant  insists  the  non-charter  lines  are  separate  and  dis- 
tinct and  must  be  treated  precisely  the  same  as  though  they  were 
owned  by  some  other  company. 

When  it  comes  to  the  payment  of  operating  expenses,  the  re- 
lations suddenly  change.  Then  we  are  told  they  are  all  one  sys- 
tem "to  be  used  in  common  to  prosper  the  general  result;"  that 
sane  business  methods  require  that  the  charter  line  depots,  termi- 
nals and  equipment  be  used,  free  of  charge,  by  the  non-charter 
lines;  that  since  all  of  these  lines  belong  to  defendant,  to  charge 
the  non-charter  lines  for  a  service  rendered  by  the  charter  lines 
means  to  charge  the  defendant  for  using  its  own  property,  and 
simply  amounts  to  a  matter  of  bookkeeping.  In  other  words, 
defendant  assumes  the  relations  between  the  charter  and  non- 
charter  lines  can  be  shifted  and  changed  to  suit  the  occasion  and 
are  purely  matters  of  convenience  to  it. 

The  state  contends  that,  for  the  purpose  of  an  accounting, 
these  charter  and  non-charter  lines  must  be  treated  as  distinct 
and  independent  lines,  not  only  in  the  division  of  earnings,  but 
in  the  payment  of  expenses ;  that  the  operating  expenses  of  these 
non-charter  lines  can  no  more  be  saddled  upon  the  charter  lines 
than  can  the  operating  expenses  of  any  other  railroad. 

Upon  the  earnings  of  the  non-charter  lines  no  per  centum  is 
due  the  state.  The  free  use  of  these  charter  line  depots,  termi- 
nals and  facilities,  by  the  non-charter  lines,  means  a  saving  an- 
nually to  the  non-charter  lines  of  hundreds  of  thousands  of  dol- 
lars in  the  way  of  expense.  This  means  that  the  annual  revenue 
which  flows  into  defendant's  treasury  from  the  non-charter  lines 
is  enormously  increased.  It  needs  no  argument  to  prove  that 
when  you  lessen  the  expenses  of  the  non-charter  lines,  you  in- 
crease their  net  earnings.  Every  dollar  of  this  increased  revenue 
is  due  to  the  fact  that  nothing  is  allowed  the  charter  lines  for 
services  rendered  the  non-charter  lines. 

The  free  use  of  this  charter  line  property  by  the  non-charter 
lines  means  to  increase  the  net  earnings  of  the  non-charter  lines, 
upon  which  the  defendant  owes  no  per  centum,  at  the  expense  of 
the  gross  earnings  of  the  charter  lines,  upon  which  the  defendant 
must  pay  a  per  centum.  It  means  to  put  revenue  into  the  treas- 
ury of  the  Illinois  Central  at  the  expense  of  the  treasury  of  the 
state  of  Illinois. 


73 

DIVERSION  OF  TRAFFIC. 

Paragraph  139  relates  to  the  diversion  of  traffic  from  the 
charter  to  the  non-charter  Hnes.  It  avers,  in  substance,  that 
defendant,  for  the  purpose  of  cheating  and  defrauding  the  state 
and  of  minimizing  and  reducing  the  gross  receipts  of  the  charter 
lines,  diverted  the  transportation  of  large  quantities  of  freight 
from  the  charter  lines  to  the  non-charter  lines  and  transported 
the  same  over  the  non-charter  lines;  that  in  every  instance  the 
freight  so  transported,  if  carried  by  the  shortest  and  most  con- 
venient route  from  the  point  of  shipment  to  its  destination, 
would  have  been  carried  over  the  charter  lines ;  that  from  traffic 
so  diverted  to  the  non-charter  lines,  the  defendant  collected  and 
received  in  earnings  at  least  the  sum  of  two  million  dollars. 

Under  the  facts  averred  in  this  paragraph,  all  of  this  traffic 
naturally  and  honestly  belonged  to  the  charter  lines  and  was 
diverted  by  defendant  to  the  non-charter  lines  for  the  purpose 
of  minimizing  the  charter  line  receipts  and  cheating  and  defraud- 
ing the  state  of  Illinois.  If  these  averments  are  admitted  by  the 
demurrers,  it  is  not  worth  while  to  discuss  the  theories  advanced 
by  counsel,  because  they  assume  these  averments  can  be  utterly 
ignored. 

An  averment  that  certain  transactions  constitute  a  fraud, 
or  a  given  act  is  fraudulent,  is  a  mere  conclusion,  which  a  de- 
murrer does  not  admit.  But  the  averment  here  is  not  of  that 
character.  The  averment  is  that  this  traffic  was  diverted  for 
the  purpose  of  cheating  and  defrauding  the  state  by  minimizing 
and  reducing  the  charter  line  receipts. 

An  averment  that  a  thing  is  done  for  the  purpose  of  defraud- 
ing, or  with  intent  to  defraud,  is  an  allegation  of  fact,  and  not  a 
conclusion  of  law.  In  Piatt  v.  Meade,  9  Fed.  Rep.,  91,  cited  in 
our  brief,  the  court  say : 

"The  averments  in  the  bill  of  an  intent  to  defraud  are  not, 
as  counsel  for  defendants  claim,  averments  of  a  mere  conclusion 
of  law,  to  be  disregarded  on  demurrer,  except  as  necessarily  to  be 
inferred  from  the  other  facts  alleged.  They  are  averments  of  an 
affirmative  and  essential  fact.  An  averment  of  actual  fraudulent 
intent  is  to  be  passed  upon  as  a  fact,  and  the  demurrer  must  be 
held  to  admit  it  as  a  fact  when  pleaded  as  the  motive  for  the 
transaction." 

The  averment,  that  this  traffic  was  diverted  from  the  charter 
lines  for  the  purpose  of  cheating  and  defrauding  the  state,  is 


74 

admitted  by  these  demurrers.  That  the  revenue  of  the  state 
cannot  be  depleted  by  schemes  devised  for  the  very  purpose  of 
defrauding  the  state,  would  seem  to  be  clear. 


RECEIPTS  FROM  EATING-HOUSES  AND  DINING- 
CARS. 

Paragraph  140  relates  to  receipts  derived  by  defendant  from 
eating-houses  and  dining-cars  operated  along  and  upon  the 
charter  lines.  It  avers,  in  substance,  that  since  1877 the  defend- 
ant has  owned  and  conducted  various  eating-houses  and  hotels 
along  and  upon  the  charter  lines  and  in  connection  therewith, 
for  the  use  and  accommodation  of  charter  line  patrons,  and  during 
each  year  received  from  the  patrons  of  said  eating-houses  and 
hotels  large  sums  of  money,  the  exact  amount  of  which  is  to  the 
state  unknown;  that  during  said  time,  the  defendant  operated 
certain  dining-cars  upon  the  charter  lines,  for  the  purpose  of 
furnishing  the  patrons  thereof  meals,  food  and  drink,  and  during 
each  year  received  therefor  large  sums  of  money,  the  exact 
amount  of  which  is  to  the  state  unknown ;  that  the  total  moneys 
received  from  the  operation  of  said  eating-houses,  hotels  and 
dining-cars  amounted  to  the  sum  of  $1,500,000;  that  the  moneys 
so  received  were  a  part  of  the  gross  receipts  derived  from  the 
charter  lines,  and  it  was  the  duty  of  defendant  to  credit  said 
receipts  to  the  charter  lines  and  pay  the  state  a  per  centum 
thereon;  that  defendant,  for  the  purpose  of  defrauding  the  state, 
failed  to  credit  said  receipts  to  the  charter  lines  and  no  per 
centum  was  paid  thereon. 

Aside  from  the  usual  complaint  that  the  averments  are 
general,  two  objections  are  urged  to  this  claim.  The .  first 
objection  is  that  the  operation  of  these  eating-houses  and  hotels 
is  ndt  within  the  charter  powers  of  defendant,  and  hence  the 
receipts  derived  therefrom  are  not  charter  line  receipts.  Counsel 
say,  in  their  brief:  "The  operation  of  hotels  and  eating-houses 
is  not  impliedly  within  a  grant  of  power  to  operate  a  railroad." 
Four  cases  are  cited  in  support  of  this  contention.  But  the 
cases  cited  do  not  so  hold.  In  the  Oregon  case,  cited  by  counsel 
(37  Oregon,  502),  the  court  say: 

"The  erection  and  maintenance  by  railway  companies  of 
hotels  or  eating  stations  at  suitable  and  convenient  places  along 
their  roads  for  the  use  and  accommodation  of  their  employees 
and  passengers  is  not  only  a  legitimate  and  proper  railroad  use. 


75 

but  almost,  if  not  quite,  a  necessity  in  many  instances  of  modem 
railway  travel.  A  railway  company  has  an  undoubted  right  to 
use  its  property  in  any  way  the  exigencies  of  its  business  or  the 
convenience  or  accommodation  of  its  passengers  may  require  or 
suggest." 

Counsel  admit  that  if  these  eating-houses  and  hotels  were 
used  principally  for  the  accommodation  of  charter  line  patrons, 
their  operation  was  within  the  charter  authority.  They  insist, 
however,  that  the  bill  does  not  so  aver;  that  the  only  averment 
is,  they  were  conducted  "in  connection  with  the  operation  of" 
the  charter  lines,  and  this  is  not  equivalent  to  an  averment  that 
they  were  used  principally  in  connection  with  these  lines.  This 
is  a  distinction  without  much  difference.  Furthermore,  it 
ignores  facts  averred.  The  averments  of  this  paragraph  are 
that  these  eating-houses  and  hotels  are  situated  along  and  upon 
the  charter  lines;  that  they  are  conducted  for  the  use  and  accom- 
modation of  the  patrons  of  the  charter  lines  and  are  operated 
in  connection  with  the  charter  lines.  From  these  averments, 
and  the  situation  disclosed,  no  rational  conclusion  is  possible 
other  than  these  eating-houses  and  hotels  are  principally  used 
by  the  employees  and  patrons  of  the  charter  lines. 

The  second  objection  is,  the  bill  does  not  aver  that  any 
gross  income  was  derived  from  these  eating-houses  and  dining- 
cars.  Counsel  insist  that  no  obligation  is  imposed  by  the  charter 
to  pay  a  per  centum  either  upon  gross  proceeds  or  gross  receipts; 
that  the  only  obligation  is  to  pay  a  per  centum  upon  gross  income; 
that  gross  income  means  gross  increase,  gross  earnings,  gross 
profits,  and  not  any  part  of  the  capital  investment;  that  while 
the  bill  avers  large  sums  of  money  were  derived  from  these  eating- 
houses  and  dining-cars,  this  is  not  sufficient,  because  the  moneys 
received  may  have  been  merely  the  return  of  capital  invested  in 
the  supplies  furnished  the  patrons;  that  the  bill  must  go  further 
and  allege  that  gross  income  was  derived.  Counsel  say,  in  their 
brief: 

"While  gross  receipts  is  a  broad  expression,  its  meaning  is 
influenced  by  the  character  of  the  receipts  contemplated  thereby 
and  the  connection  in  which  used.  The  word  'proceeds'  is  also 
a  broad  term,  but  it  too  is  one  of  equivalent  import,  with  a 
meaning  to  be  determined  from  the  context.  The  intention  of 
the  legislature  in  using  the  words  'gross  proceeds'  and  'gross 
receipts'  is  manifest  by  their  joinder  with  the  words  'or  income.* 
The  three  principal  words  are  put  upon  the  same  plane  and  were 


76 

intended  to  convey  the  same  meaning.  There  is  nothing  to  indi- 
cate that  the  word  '  or  '  was  used  otherwise  than  in  its  ordinary 
sense  as  a  conjunctive  particle,  and  hence  the  defendant  can 
satisfy  its  obligation  by  payment  to  the  state  of  the  requisite 
per  centum  of  gross  income." 

This  contention  means  that  when  the  legislature  used  the 
w^ords  "gross  or  total  proceeds,  receipts  or  income,"  the  only  thing 
it  had  in  mind  was  gross  income;  that  the  only  obligation  it  in- 
tended to  create  was  to  pay  a  per  centum  upon  gross  income.  If 
this  was  its  intent,  the  charter  should  be  so  construed.  But 
what  is  there  to  show  it  did  so  intend?  Absolutely  nothing  but 
the  say-so  of  counsel. 

The  charter  itself  demonstrates  the  fallacy  of  any  such  con- 
tention. It  shows  beyond  question  that  when  the  legislature 
used  the  words  "gross  or  total  proceeds,  receipts  or  income," 
what  it  had  in  mind  was  not  gross  income,  but  gross  receipts.  I 
will  ask  your  honors  to  turn  to  the  proviso  in  section  18  on  page 
31  of  the  abstract.  It  begins  about  the  middle  of  the  page. 
This  proviso  is  the  very  last  expression  of  the  legislature  upon  the 
subject  of  the  state's  per  centum,  and  in  the  closing  line  of  this 
proviso  the  w^ords  used,  and  the  only  words  used,  are  gross  re- 
ceipts.    This  proviso  reads  as  follows: 

"Provided,  in  case  the  five  per  centum  provided  to  be  paid 
into  the  state  treasury  and  the  state  taxes  to  be  paid  by  the  cor- 
poration do  not  amount  to  seven  per  cent  of  the  gross  or  total 
proceeds,  receipts  or  income  (your  honors  will  observe  that  all 
three  of  the  words  are  here  used),  then  the  said  company  shall 
pay  into  the  state  treasury  the  difference,  so  as  to  make  the  whole 
amount  paid  equal  at  least  to  seven  per  cent  (of  what?)  of  the 
gross  receipts  of  said  corporation." 

The  significance  of  the  use  of  the  words  gross  receipts,  in  the 
closing  part  of  this  proviso,  to  the  exclusion  of  other  words,  is  too 
plain  to  be  misunderstood.  It  makes  it  absolutely  clear  that 
what  was  uppermost  in  the  mind  of  the  legislature  was  not  gross 
income,  but  gross  receipts,  and  that  the  words  "gross  or  total  pro- 
ceeds, receipts  or  income,"  were  used  in  the  sense  of  gross  re- 
ceipts. 

In  view  of  the  closing  words  of  this  proviso,  it  is  idle  to  discuss 
the  meaning  of  "gross  income,"  or  quote  decisions  which  involve 
gross  earnings.  The  obligation  imposed  by  this  charter  was  to 
pay  a  per  centum  upon  gross  receipts. 


77 

Counsel  say  that  to  collect  a  per  centum  upon  the  daily  re- 
ceipts derived  from  these  eating-houses  and  dining-cars  simply 
means  to  collect  a  per  centum  over  and  over  again  upon  the 
working  capital  invested  in  the  food  and  supplies.  To  make  the 
point  clear,  they  use  an  illustration.  On  page  309  of  their  brief, 
they  say: 

"Suppose  an  expenditure  of  $100  of  capital  in  the  purchase  of 
suppHes,  and  the  entire  sum  is  collected  from  patrons  on  the  sale 
of  the  prepared  food.  According  to  the  state,  $7  must  be  paid  to 
it,  leaving  for  reinvestment  $93.  Suppose  the  same  character 
of  purchase  and  collection  and  payment  of  a  further  seven  per 
cent  to  the  state.     In  the  end,  the  state  has  all  the  capital." 

This  contention  assumes  that  the  Illinois  Central  buys  din- 
ing-car supplies,  prepares  and  converts  the  supplies  into  food, 
serves  the  food  at  its  orginal  cost,  and  does  the  cooking  and  serv- 
ing for  nothing.  It  assumes  that  the  receipts  derived  from  these 
dining-cars  and  hotels  include  no  gain,  but  are  mere  reimburse- 
ments for  the  cost  of  the  supplies.  It  assumes  that  when  you 
enter  "the  last  car  in  the  rear,"  order  an  oyster  cocktail,  a  beef- 
steak and  a  pot  of  coffee,  and  pay  therefor  a  dollar  and  thirty- 
five  cents,  plus  the  salary  of  the  waiter,  that  no  part  of  this  dollar 
and  thirty-five  cents  is  profit,  but  the  entire  amount  is  simply  a 
return  of  the  capital  invested  in  a  handful  of  ground  coffee,  half 
a  pound  of  raw  meat,  four  oysters,  a  tablespoonful  of  tomato 
catchup  and  two  drops  of  tabasco  sauce.  Such  an  assumption  is 
too  great  a  tax  upon  human  credulity. 

Furthermore,  whether  the  moneys  derived  from  these  dining- 
cars  and  hotels  included  profits,  or  were  merely  returns  upon  the 
capital  invested,  is  not  material  upon  the  argument  of  these  de- 
murrers. Under  the  averments  of  this  paragraph,  these  eating- 
houses  and  dining-cars  were  charter  line  concerns  and  the  moneys 
derived  therefrom  were  charter  line  receipts.  The  obligation  of 
the  charter  is  to  pay  a  per  centum  upon  gross  receipts. 


RENTALS  RECEIVED  FROM  OTHER  ROADS. 
Paragraph  144  relates  to  rentals  received  from  other  railroads 
for  the  use  of  charter  line  rolling  stock.  It  avers,  in  substance, 
that  defendant  collected  from  other  railroads,  for  and  on  account 
of  the  use  of  charter  line  cars,  the  sum  of  five  million  dollars,  and 
that  no  part  of  this  amount  was  included  in  defendant's  account 
of  charter  line  receipts,  and  no  per  centum  was  paid  thereon. 


78 

Two  objections  are  urged  to  this  claim.  The  first  objection 
is,  the  bill  does  not  aver  the  cars  owned  by  defendant  were  not 
equally  the  property  of  the  non-charter  lines;  that  an  averment 
that  these  cars  are  the  property  of  the  charter  lines  is  merely  a 
conclusion.  If,  as  counsel  say,  an  averment,  that  these  cars  are 
the  property  of  the  charter  lines,  is  a  conclusion,  what  good  would 
it  do  to  aver  they  are  not  the  property  of  the  non-charter  lines? 
According  to  their  theory,  this  would  also  be  a  conclusion.  The 
averment,  that  these  cars  belong  to  and  are  a  part  of  the  property 
and  equipment  of  the  charter  lines,  as  an  averment  of  ownership, 
is  amply  sufficient. 

The  second  objection  is,  that  the  rentals  received  by  defend- 
ant for  the  use  of  charter  line  cars  were  offset  by  rentals  paid  by 
defendant  for  the  use  of  cars  belonging  to  other  railroads.  Coun- 
sel say,  in  their  brief: 

"It  is  common  knowledge  that  railroads  interchange  cars 
under  an  arrangement  by  which,  when  the  car  of  one  company 
goes  upon  the  tracks  of  another,  the  car  of  some  other  company 
is  received.  In  view  of  the  previous  settlements  between  de- 
fendant and  the  state,  it  should  be  assumed  that  whatever  sums 
of  this  character  were  omitted  from  the  accounts  were  offset  by 
like  balances  due  other  companies,  arising  from  this  interchange." 

This  court  has  no  knowledge,  common  or  otherwise,  of  the 
practice  existing,  if  any  does  exist,  as  to  interchanging  cars. 
If  such  a  practice  exists,  and  defendant  desires  to  rely  upon  it, 
it  must  answer  the  bill  and  set  up  the  practice.  This  paragraph 
avers  that  that  defendant  collected,  in  rentals,  five  million  dol- 
lars for  the  use  of  charter  line  cars.  The  argument  here  made 
simply  amounts  to  an  assertion  that  this  averment  is  not  true; 
that  a  practice  existed  of  interchanging  cars  and  no  rentals  what- 
ever were  in  fact  collected.  It  is  simply  another  attempt,  upon 
the  argument  of  these  demurrers,  to  impeach  facts  which  are  ad- 
mitted by  the  demurrers. 


INTEREST  ON  DEPOSITS. 
Paragraph  149  relates  to  interest  received  upon  charter  line 
deposits.  It  avers,  in  substance,  that  since  1877,  defendant  has 
received,  in  interest,  upon  charter  line  funds  deposited  in  banks, 
divers  large  sums  of  money ;  that  no  part  of  this  interest  was  ever 
included  in  defendant's  account  of  charter  line  receipts  and  no 
per  centum  was  paid  thereon;  that  defendant  has  refused  to 


79 

furnish  the  state  any  information  whatever  concerning  the  mon- 
eys kept  in  banks  or  the  amount  of  interest  received  thereon  and 
has  refused  to  permit  the  state  to  examine  any  of  its  books, 
papers  or  accounts  relating  thereto;  that  from  the  best  informa- 
tion obtainable,  the  total  amount  of  interest  received  by  de- 
fendant upon  charter  line  deposits  was  at  least  three  million 
dollars. 

That  interest  collected  upon  charter  line  receipts  deposited 
in  banks,  is  a  part  of  the  gross  receipts  derived  from  the  charter 
lines,  would  seem  too  plain  to  admit  of  discussion.  In  view  of 
defendant's  refusal  to  furnish  any  information  or  permit  its 
books  and  accounts  to  be  examined,  it  cannot  now  be  heard  to 
say  the  averments  of  the  bill  as  to  this  claim  are  too  indefinite. 


REBATES. 

Paragraph  151  relates  to  rebates  allowed  as  against  charter 
line  receipts.  It  avers,  in  substance,  that  defendant,  for  the 
purpose  of  cheating  and  defrauding  the  state,  has,  from  time  to 
time,  allowed  to  certain  of  its  patrons  rebates,  in  the  form  of 
fictitious  claims;  that  these  rebates  were  deducted  from  the 
charter  line  receipts  and  no  per  centum  was  paid  thereon;  that 
while  complainant  is  unable  to  state  the  exact  amount  of  the 
rebates  and  fictitious  claims  so  deducted,  it  avers  that  between 
October  31  1903  and  October  31,  1905,  there  was  deducted  from 
the  gross  receipts  of  the  charter  lines,  in  claims  and  allowances 
which  defendant  knew  to  be  fictitious,  $688,179.56,  and  upon 
information  and  belief  avers  that  the  total  amount  of  rebates  and 
fictitious  claims  deducted  from  the  charter  line  receipts  since  1877 
amounted  to  the  sum  of  ten  million  dollars. 

Counsel  say,  all  rebates  are  not  unlawful  and  all  claims  are 
not  fictitious;  that  whether  a  given  rebate  is  unlawful  or  a  given 
claim  fictitious,  depends  upon  the  facts  and  circumstances  on 
which  the  transaction  is  founded;  that  no  issuable  facts  are 
averred  in  this  paragraph,  but  merely  conclusions. 

In  the  first  place,  it  makes  no  difference  whether  these  rebates, 
in  and  of  themselves,  were  lawful  or  unlawful.  They  were  de- 
ducted from  the  gross  receipts  of  the  charter  lines,  and  the  amount 
of  receipts  upon  which  the  state  was  entitled  to  a  per  centum  was 
thereby  reduced  by  ten  million  dollars,  and  the  demurrers  so 
admit.  The  charter  obligation  is  to  pay  a  per  centum  upon  the 
total  or  gross  receipts.     Until  the  per  centum  of  the  state  is 


80 

measured,  no  rebates,  whether  lawful  or  unlawful,  and  no  claims, 
whether  fictitious  or  otherwise,  can  be  deducted  from  the  gross 
receipts. 

Furthermore,  the  averments  of  this  paragraph  are  not  con- 
clusions. The  averment,  that  these  rebates  consisted  of  claims 
which  defendant  knew  were  wholly  fictitious,  is  the  averment  of 
a  fact.  The  averment,  that  these  rebates  were  deducted  from 
the  charter  line  receipts  for  the  purpose  of  cheating  and  defraud- 
ing the  state,  is  the  averment  of  a  fact,  and  the  courts  so  hold. 
These  averments  of  fact  cannot  be  converted  into  conclusions  by 
a  simple  assertion. 

The  second  objection  urged  to  this  claim  is  the  chronic 
objection,  with  a  little  more  emphasis,  that  items,  dates,  and  all 
minutia  of  detail  are  not  set  out.  Counsel  ask:  "What  un- 
lawful rebates?  What  fictitious  claims?  In  whose  name  were 
they  allowed?  Who  presented  the  claims?  "  Under  their 
contention,  more  particularity  in  averment  is  required  in  this 
bill  than  in  an  indictment  under  the  criminal  code. 

An  indictment  under  the  extortion  statute,  which  averred 
that  on  a  certain  day  the  Illinois  Central  owned  and  operated 
a  railroad  in  the  county  of  Sangamon  and  state  of  Illinois,  and 
did  then  and  there  charge  and  collect  more  than  a  reasonable 
compensation  for  the  use  of  its  cars  upon  said  road,  would  be 
a  good  indictment.  Even  the  date  averred  would  not  be  material 
when  it  came  to  the  proof. 

The  rule  insisted  upon  by  defendant's  counsel  would  defeat 
a  complainant  in  every  case  where  his  opportunities  for  acquiring 
knowledge  were  not  equal  to  those  of  defendant.  Courts  are 
not  organized  to  aid  in  the  accomplishment  of  any  such  purpose. 

Under  the  fiduciary  relation  which  here  exists,  and  this 
relation  neither  has  been  nor  can  be  successfully  denied ;  in  view 
of  the  fact  that  the  books  and  accounts  are  in  the  defendant's 
exclusive  possession  and  all  the  transactions  contained  in  the 
books  are  peculiarly  within  defendant's  own  knowledge;  in  view 
of  the  fact  that  an  accounting  is  sought  and  the  bill  avers  an 
accounting  is  essential  to  enable  the  state  to  discover  the  evi- 
dence, we  confidently  assert  that  the  averments  of  this  paragraph 
and  of  every  other  paragraph  contained  in  the  bill  are  sufficiently 
specific  to  meet  every  requirement  of  good  pleading. 


81 

CAIRO  AND  MOUNDS. 

Paragraph  152  relates  to  the  movement  of  joint  traffic  from 
points  south  of  the  Ohio  river  to  Cairo  and  Mounds.  Mounds 
is  a  station  or  junction  upon  the  charter  Hnes,  nine  miles  north 
of  Cairo.  All  freight  from  points  south  of  the  Ohio  river, 
destined  to  St.  Louis,  is  billed  to  Mounds.  This  freight  is  trans- 
ported over  the  charter  Hnes,  a  distance  of  nine  miles,  and  for 
this  service  the  charter  line  is  entitled  to  a  proportionate  share 
of  the  joint  earning. 

All  freight  from  points  south  of  the  Ohio  river,  destined  to 
Cairo,  is  transported  over  the  Cairo  bridge  to  Cairo  Junction, 
where  the  bridge  approach  ends,  and  thence  south  upon  the  old 
charter  line  tracks  to  Cairo.  This  freight  is  transported  over  the 
charter  lines,  a  distance  of  about  five  miles,  and  for  this  service 
the  charter  line  is  also  entitled  to  a  proportionate  share  of  the 
joint  earning. 

Upon  all  of  this  freight,  billed  to  Cairo  and  Mounds,  the 
defendant  charges  only  the  local  rates  to  the  Ohio  river,  and  all 
of  these  local  rates  are  credited  to  the  non-charter  lines  south 
of  the  river.  For  the  five-mile  haul  to  Cairo  and  the  nine-mile 
haul  to  Mounds  over  the  charter  Hnes,  the  charter  lines  are  not 
allowed  a  cent.     They  work  for  nothing  and  board  themselves. 

This  paragraph  avers  that  this  practice  was  inaugurated 
and  pursued  for  the  purpose  of  cheating  and  defrauding  the 
state;  that  while  complainant  cannot  state  the  exact  amounts 
earned  by  the  charter  lines  in  hauling  the  traffic  to  Cairo  and 
Mounds,  it  avers  upon  information  and  belief  that  the  total 
amount  of  said  earnings  was  at  least  the  sum  of  three  milUon 
dollars. 

Aside  from  the  statement  that  this  claim  involves  receipts 
derived  from  the  carriage  of  interstate  traffic,  which  I  shall  later 
discuss,  and  the  usual  complaint  that  the  averments  are  general, 
no  attempt  is  made  to  justify  this  practice.  And  in  view  of  the 
practice,  this  is  not  strange. 

This  scheme  aptly  illustrates  the  inconsistent  and  dishonest 
methods  of  defendant  respecting  short  hauls.  As  heretofore 
shown,  in  dividing  joint  earnings,  whenever  a  short  haul  occurs 
on  a  non-charter  line,  fictitious  miles  are  added  and  arbitraries 
are  awarded.  They  tell  us  this  is  common  practice,  is  the  appli- 
cation of  sane  business  methods,  and  is  absolutely  essential  to 
equalize  expenses,  and  permit  the  non-charter  Hne  to  live.  But 
when  the  short  haul  occurs  on  a  charter  line,  between  the  Ohio 

(6) 


82 

river  and  Cairo  and  Mounds — in  one  instance  five  miles  and  in 
the  other  nine — the  common  practice  is  spurned,  sane  business 
methods  are  forgotten,  operating  expenses  are  ignored,  and  the 
charter  line  is  awarded  nothing,  because,  forsooth,  the  haul  is 
short. 

GENERAL  AVERMENTS. 

Paragraphs  153  to  167  relate  generally  to  methods  of  keeping 
the  account,  the  character  of  the  statements  furnished  the  gov- 
ernor, the  removal  of  certain  books  beyond  the  state,  the  magni- 
tude of  the  accounts  involved,  and  the  various  schemes  practiced 
by  defendant. 

Paragraph  168  is  the  prayer  for  an  accounting.  Then  follow 
the  exhibits  and  interrogatories.  In  analyzing  the  bill,  I  have 
endeavored  to  discuss  all  the  objections  raised  by  the  separate 
demurrers,  which  are  relied  on  by  defendant's  counsel. 


DEMURRER  TO  BILL  AS  A  WHOLE. 
Three  objections  are  raised  by  the  demurrer  to  the  bill  as  a 
whole,  and  these  I  shall  now  proceed  to  discuss. 

STATED  ACCOUNTS. 

The  first  objection  is,  the  semi-annual  statements  are  stated 
and  settled  accounts,  and  the  bill,  as  framed,  is  insufficient  to 
impeach  them.  It  is  contended  that  since  1877  these  semi- 
annual statements,  or  copies  of  the  account,  furnished  the  various 
governors,  have  either  been  retained  without  objection  or  express- 
ly approved  by  the  governors,  and  the  money  due  the  state  in  per 
centum,  as  shown  by  these  semi-annual  statements,  has  been 
paid  into  the  treasury;  that  these  semi-annual  statements  are, 
therefore,  in  law,  stated  and  settled  accounts,  and  cannot  be 
impeached  except  by  showing  fraud,  accident  or  mistake;  that 
this  is  not  a  bill  for  an  original  accounting,  but  a  bill  to  open 
settled  accounts. 

Ntmierous  cases  are  cited  by  counsel  upon  the  doctrine  of 
stated  accounts  and  the  particularity  of  averment  necessary 
to  open  settled  accounts.  It  will  not  be  necessary  to  discuss 
these  cases.  We  do  not  dispute  the  doctrine  there  announced, 
but  we  do  deny  its  application.  The  question  is,  are  these 
semi-annual  statements  stated  accounts? 


83 

If  they  are  stated  accounts,  I  concede,  here  and  now,  thiB 
bill  is  insuflficient  and  these  demurrers  should  be  sustained.  If 
they  are  stated  accounts,  I  furthermore  concede  this  lawsuit  is 
ended  and  the  claims  of  the  state  are  forever  lost.  In  view  of 
the  magnitude  of  these  accounts,  the  period  of  time  covered  by 
them,  the  possession  of  the  books  by  this  defendant  and  the 
peculiar  knowledge  of  the  facts  by  it,  no  bill  can  be  drawn, 
sufficient  in  law,  to  impeach  these  statements  under  the  rules 
applicable  to  settled  accounts. 

If  these  semi-annual  statements  are  not  stated  accounts, 
then  this  is  simply  a  bill  for  an  accounting  where  payments  have 
been  made  upon  the  open  account,  and  as  heretofore  shown, 
under  every  rule  of  pleading,  is  amply  sufficient. 

The  entire  argument  of  defendant's  counsel  as  to  the  in- 
sufficiency of  the  averments  of  this  bill  is  based  upon  the  assump- 
tion that  these  semi-annual  statements  are  stated  and  settled 
accounts.  They  sum  up  their  discussion  of  the  division  of  earn- 
ings, the  bridge  arbitraries,  the  free  use  of  charter  line  property, 
and  every  other  claim,  with  the  statement  that  these  matters 
were  included  in  the  semi-annual  statements  which  were  passed 
upon  and  approved  by  the  governors  and  were  therefore,  prima 
facie  at  least,  adjusted  and  settled  between  the  company  and 
the  state;  that  before  these  statements  can  be  ignored  and  new 
metjiods  substituted,  these  semi-annual  statements  must  be 
impeached  by  the  averment  of  facts  showing  fraud,  accident  or 
mistake. 

If  these  semi-annual  statements  are  not  stated  accounts,  the 
entire  fabric  of  counsel's  argument,  as  to  the  insufficiency  of 
the  averments  of  this  bill,  falls  to  the  groimd.  It  is  only  neces- 
sary, therefore,  to  discuss  the  one  question,  are  these  semi-annual 
statements  or  copies  of  the  account  furnished  the  governors  stated 
accounts? 

The  argument  that  these  semi-annual  statements  are  stated 
accounts  centers  around  and  hinges  upon  a  single  proposition, 
namely,  that  the  governor,  as  the  agent  of  the  state,  is  vested  with 
power  to  determine,  semi-annually,  what  constitutes  performance 
of  the  charter  obligation  by  the  Illinois  Central  Railroad  Company, 
and  in  the  absence  of  a  showing  of  fraud,  accident  or  mistake,  or 
that  the  governor  ivas  imposed  upon,  the  judgment  and  determination 
of  the  governor  binds  the  state  and  releases  the  company.  The 
proposition  is  adroitly  stated  in  many  different  ways,  but  how- 
ever stated,  it  has  but  this  meaning. 


84 

Section  18  of  the  charter  provides,  in  part,  as  follows: 

"And  for  the  purpose  of  ascertaining  the  proceeds,  receipts 
or  income  aforesaid,  an  accurate  account  shall  be  kept  by  said 
company,  a  copy  whereof  shall  be  furnished  to  the  governor  of 
the  State  of  Illinois;  the  truth  of  which  account  shall  be  verified 
by  the  affidavits  of  the  treasurer  and  secretary  of  such  company. 
And  for  the  purpose  of  verifying  and  ascertaining  the  accuracy 
of  such  account,  full  power  is  hereby  vested  in  the  governor  of 
the  State  of  Illinois,  or  any  other  person  by  law  appointed,  to 
examine  the  books  and  papers  of  said  corporation,  and  to  exam- 
ine, under  oath,  the  officers,  agents  and  employees  of  said 
company,  and  other  persons." 

Counsel  say,  the  fact  that  "full  power"  was  vested  in  the 
governor,  by  this  section,  to  examine  the  company's  books  and 
its  officers  and  agents  under  oath,  for  the  purpose  of  verifying 
and  ascertaining  the  accuracy  of  the  account,  plainly  im.plies 
that  judicial  discretion  was  to  be  exercised  by  the  governor  and 
clearly  manifests  a  purpose  to  provide  a  means  of  adjustment, 
an  agency  through  which  the  semi-annual  accounts  could  be 
determined  and  settled.  They  say  this  conclusion  necessarily 
results,  for  two  reasons: 

First. — Because  the  Governor  was  named  instead  of  a  subordi- 
nate officer.  They  lay  great  stress  upon  the  dignity  and  impor- 
tance of  the  office  of  governor,  and  cite  cases  to  show  that 
ministerial  duties  do  not,  as  a  rule,  pertain  to  it.  They  say  the 
entire  executive  power  of  the  state  is  vested  in  the  governor; 
that  he  is  the  man  who  grants  reprieves,  issues  pardons,  com- 
mands armies,  and  convenes  the  general  assembly  in  extraordi- 
nary session.  This  is  all  true,  but  he  also  signs  the  commissions 
of  notaries  public  and  justices  of  the  peace. 

Nobody  questions  the  importance  of  the  governor.  But  if 
counsel,  instead  of  reading  decisions  from  other  states,  will  read 
the  statutes  of  Illinois,  they  will  find  that  where  one  duty  is 
imposed  upon  the  governor  involving  judgment  and  discretion, 
a  hundred  are  imposed  which  are  purely  ministerial. 

After  emphasizing  the  dignity  and  standing  of  the  governor 
and  announcing  the  proposition  that  ministerial  duties  do  not, 
as  a  rule,  apply  to  him  (which  is  not  true  in  IlUnois),  counsel  say, 
from  the  mere  fact  the  governor  was  named  in  section  18,  it  must  bg 
concluded  the  legislature  intended  he  should  exercise  judgment  and 
discretion  in  adjusting  the  account.  They  mean,  of  course,  judi- 
cial discretion;  otherwise  their  contention  is  meaningless. 


85 

They  ask,  if  this  is  not  true,  why  was  the  governor  named? 
Will  the  court  presume  the  legislature  intended  to  impose  upon 
the  governor  purely  ministerial  duties?  That  he  was  only  ex- 
pected to  examine  the  statements,  compare  them  with  the  books, 
add  up  the  figures,  and  do  the  work  of  a  dummy  or  clerk?  They 
wind  up  by  saying,  no  such  ridiculous  and  absurd  intent  will  be 
imputed  to  the  legislature. 

The  charter  itself  demonstrates  the  fallacy  of  this  contention. 
By  section  IS,  purely  ministerial  duties  were  imposed  upon  the 
governor.  He  was  reqmred  to  make  a  deed  of  the  charter  lands. 
There  were  no  inherent  reasons  why  the  governor  should  make 
it.  The  lands  were  subject  to  the  disposal  of  the  legislature,  and 
any  person  named  could  have  made  the  deed. 

The  conditions  upon  the  happening  of  which  the  deed  should 
be  made  were  expressly  set  out  in  section  15.  The  form,  recitals 
and  manner  of  execution  were  minutely  prescribed.  In  making 
this  deed,  the  governor  was  allowed  no  discretion  whatever. 
He  merely  performed  the  work  of  a  clerk.  In  view  of  this  sec- 
tion, what  becomes  of  the  argument,  that  because  the  governor 
was  named  in  section  18,  judicial  determination  must  have  been 
intended  ? 

The  second  reason  assigned  for  their  conclusion  is,  the  legis- 
lature must  have  inteiided  to  vest  somewhere  power  and  authority 
to  adjust  these  semi-annual  accounts  and  determine  what  should 
constitute  performance  of  defendant's  obligation.  They  say  the 
legislature  must  have  known  that  important  questions  would 
frequently  arise ;  that  controversies  and  disputes  over  the  division 
of  earnings,  the  exclusion  of  expenses  and  many  other  questions, 
would  from  time  to  time  occur;  that  it  cannot  be  supposed  the 
legislature  intended  to  leave  these  questions  and  disputes  open, 
and  the  amount  due  from  time  to  time  unsettled,  and  place  de- 
fendant in  the  position  of  determining,  at  its  peril,  for  each  six 
months,  the  exact  division  and  proper  inclusion  of  earnings  and 
receipts,  thereby  subjecting  its  accounts  to  never-ending  review", 
through  the  changing  opinions  of  various  governors;  that  unless 
authority  to  adjust  the  accounts  and  determine  what  is  per- 
formance is  vested  in  the  governor,  it  nowhere  exists,  and  since 
this  is  true,  it  is  vested  in  the  governors.  They  seem  to  have  for- 
gotten all  about  the  courts. 

Counsel  further  say,  the  provisions  and  language  of  section 
18,  when  rationally  construed,  support  their  conclusion;  that  by 
this  section,  the  governor  is  vested  with  "full  power"  to  examine 


86 

the  company's  books,  its  officers  and  agents  and  other  persons, 
under  oath,  for  the  purpose  of  verifying  and  ascertaining  the  ac- 
curacy of  the  account.  They  lay  great  stress  upon  the  words 
"full  power."  They  say  the  grant  of  "full  power,"  of  authority 
to  examine,  under  oath,  is  consistent  only  with  recognition  of 
discretion,  judgment  and  finahty  over  the  subject  to  which  the 
authority  relates.  They  ask,  "Why  clothe  the  governor  with 
'full  power'  to  examine  the  books  and  officers  and  witnesses  under 
oath,  unless  it  was  intended  he  should  determine  the  amount 
due?  Was  the  governor  to  act  simply  as  a  reporter  in  taking  the 
evidence,  or  was  he  to  pass  upon  the  evidence  taken?" 

They  say  "ascertain,"  according  to  Webster,  means  "to  make 
certain  to  the  mind;  to  free  from  obscurity,  doubt  or  change;  to 
make  sure  of,  fix,  to  determine."  That  "verify"  means  "to 
prove  to  be  true  or  correct;  to  establish  the  truth  of;  to  sub- 
stantiate; to  correct  if  found  erroneous."  Therefore  they  con- 
clude the  governor  was  vested  with  "full  power"  to  determine, 
fix  or  establish  the  amount  due  from  defendant  every  six  months, 
and  in  the  absence  of  fraud,  accident  or  mistake,  the  determina- 
tion of  the  governor  was  binding  upon  the  state. 

They  furthermore  insist  that  when  the  charter  was  granted, 
it  was  a  part  of  the  general  pubHc  policy  to  designate  the  gov- 
ernor when  settlements  were  to  be  made  requiring  judgment  and 
discretion.  To  support  this  contention,  a  number  of  early 
statutes  are  set  out  in  their  brief.  But  in  every  one  of  these 
statutes  the  power  to  "determine,"  the  power  to  "settle,"  the 
power  to  bind  the  state,  was  expressly  conferred.  Nothing  was 
left  to  inference  or  construction. 

In  section  4,  chapter  41  of  the  Revised  Statutes  of  1845. 
cited  by  counsel,  the  language  was: 

"  It  shall  be  the  duty  of  said  officers,  as  said  expenses  may  be 
incurred,  to  lay  proper  vouchers  for  the  same  before  the  governor, 
whose  duty  it  shall  be,  if  such  accounts  shall  appear  to  be  reason- 
able, to  allow  the  same  and  to  certify  the  amount  thereof  to  the  audi- 
tor." 

In  section  3  of  chapter  45,  cited  by  counsel,  the  language  was: 

"The  expenses  *  *  *  being  first  ascertained  to  the 
satisfaction  of  the  executive,  shall,  on  his  certificate,  be  allowed 
and  paid  out  of  the  state  treasury  on  a  warrant  of  the  auditor." 

In  section  4  of  the  act  of  1853,  cited  by  counsel,  the  language 
was: 


87 

"The  accounts  of  said  institutions  shall  be  settled  with  the 
governor  quarterly." 

In  the  act  of  1861,  cited  by  counsel,  which  related  to  supplies 
furnished  soldiers,  the  language  was: 

"They  shall  make  out  a  detailed  report,  accompanied  by  the 
necessary  vouchers,  in  writing,  to  the  governor  *  *  *  and 
if  the  same  be  approved  by  the  governor,  the  auditor  shall  draw  his 
warrant.'' 

If  these  statutes  prove  anything  in  the  way  of  a  public  policy, 
it  is  this,  that  whenever  the  legislature  intended  to  confer  upon 
the  governor  power  to  adjust  or  settle  an  account  and  determine 
what  was  performance,  the  power  was  conferred  in  express 
language.  In  other  words,  whenever  such  power  was  intended, 
the  power  was  expressly  conferred. 

Defendant's  counsel  do  not  contend  that  by  section  18,  power 
was  expressly  conferred  upon  the  governor  to  determine  what 
constitutes  performance  of  defendant's  obligation  and  settle  the 
account.  They  do  not  contend  that  this  section,  in  language  or 
terms,  clothes  the  governor  with  power  to  approve  the  account, 
adjust  the  account,  settle  the  account,  or  determine  what  was 
performance.  What  they  claim  is,  that  this  power  results  as  a 
matter  of  construction. 

But  the  very  statutes  they  cite  refute  this  contention.  These 
statutes  show,  beyond  all  question,  that  whenever  the  legislature 
intended  that  the  governor,  as  the  agent  of  the  state,  should  ap- 
prove an  account,  settle  an  account,  or  determine  what  was 
performance,  the  power  so  to  do  was  expressly  conferred  in  clear 
and  unmistakable  terms.  From  these  statutes,  the  inference, 
and  the  only  fair  inference,  is,  that  since  no  power  was  expressly 
conferred  upon  the  governor,  by  the  terms  of  this  charter,  to  ap- 
prove the  account,  settle  the  account,  or  determine  what  was 
performance,  no  such  power  was  ever  intended. 

Upon  the  reasons  which  I  have  discussed,  and  they  are  the 
only  reasons  urged,  counsel  base  their  conclusion  that  the  gov- 
ernor, as  the  agent  of  the  state,  is  vested  with  "full  power"  to 
determine,  semi-annually,  what  constitutes  performance  of  de- 
fendant's charter  obligation,  agree  with  defendant  upon  the 
amount  due  for  the  semi-annual  period  and  settle  the  account 
upon  the  basis  of  such  agreement,  and  in  the  absence  of  fraud, 
accident,  mistake,  or  imposition  upon  the  governor,  the  judg- 
ment and  determination  of  the  governor  are  binding  and  forever 
conclude  the  state.     If  this  conclusion  is  sound,  and  these  semi- 


88 

annual  statements  were  made  in  substantial  compliance  with  the 
provisions  of  the  charter,  they  are  stated  and  settled  accounts, 
and  I  fully  agree  with  all  the  remainder  of  counsel's  argument. 

But  this  conclusion  is  not  sound.  It  runs  counter  to  a  con- 
stitutional provision  whose  language  is  too  plain  to  be  misunder- 
stood. It  has  no  basis  in  the  principles  of  law  uniformly  recog- 
nized by  this  court.  Furthermore,  it  is  not  supported  by  any 
fair  or  reasonable  construction  of  section  18. 

Counsel  undertake  to  avoid  the  force  of  the  constitutional 
provision  by  playing  upon  words.  They  admit  that  under  this 
constitutional  provision,  the  governor  has  no  power,  either  di- 
rectly or  indirectly,  to  release  defendant  from  the  performance  of 
its  charter  obligation.  They  insist,  however,  that  releasing  from 
an  obligation  is  one  thing,  and  determining  what  constitutes  per- 
formance of  an  obligation  is  entirely  another  thing.  This  fanciful 
distinction  is  based  upon  an  expression  used  by  the  supreme 
court  of  Indiana,  in  Linville  v.  State,  130  Ind.,  210.  The  ex- 
pression was:  "It  is  not  a  question  of  releasing  the  contractor, 
but  of  ascertaining  whether  he  has  performed  his  contract." 
With  all  due  respect  to  the  supreme  court  of  Indiana,  when  it 
said  that,  it  did  not  say  much.  Defendant's  counsel  are  evident- 
ly of  the  same  mind.  After  stating  the  questions  involved  in 
this  case  and  quoting  the  opinion,  they  sum  up  their  comments 
in  three  lines. 

This  so-called  distinction  between  releasing  an  obligation  and 
determining  what  amounts  to  the  performance  of  an  obligation, 
means  that,  while  the  governor  cannot  release  the  defendant,  he 
can  determine  it  need  not  perform.  It  means  the  governor  would 
have  no  right  to  release  the  defendant  from  paying  a  per  centum 
upon  dining-car  receipts  (if  they  are  charter  line  receipts),  but 
he  would  have  the  right  to  determine  that  defendant's  obligation 
had  been  fully  performed  without  paying  a  per  centum  upon 
dining-car  receipts,  and  his  judgment  would  be  final  in  the  ab- 
sence of  fraud,  accident  or  mistake.  The  difference  between 
determining  what  constitutes  performance  of  an  obligation  and 
releasing  an  obligation  is  the  difference  between  tweedle-dum  and 
tweedle-dee. 

The  proposition,  that  power  is  vested  in  the  governor  to 
determine,  semi-annually,  what  amounts  to  a  performance  of 
defendant's  obligation,  means  that  authority  to  construe  this 
charter  is  lodged  in  the  governors  instead  of  the  courts.  That 
the  legislature  so  intended,  will  never  be  presumed. 


89 

If  a  governor  was  authorized  to  construe  this  charter  for  the 
purpose  of  determining  how  the  joint  earnings  should  be  divided, 
what  should  be  included  in  gross  receipts,  whether  bridge  arbi- 
traries  should  be  deducted  and  charter  line  property  used  free, 
this  charter  would  have  as  many  meanings  as  there  were  gov- 
ernors. Under  one  governor,  the  mileage  basis  would  be  the  rule, 
and  under  another  it  would  not.  During  one  administration, 
the  Cairo  bridge  would  be  railroad  track,  and  during  another, 
an  ingenious  device  to  absorb  earnings. 

It  would  mean,  the  construction  of  this  charter  would  ulti- 
mately depend  upon  the  exigencies  of  politics  instead  of  princi- 
ples of  law  applied  by  the  courts.  It  would  mean,  the  revenue 
of  the  state,  derived  through  this  charter,  must  be  measured 
by  and  depend  upon  the  action  and  determination  of  a  single 
individual,  from  whose  judgment  there  was  practically  no  appeal. 

Counsel  say,  the  governor  is  vested  with  "full  power  "  to 
determine  what  amounts  to  a  performance  of  defendant's 
obligation,  and  in  the  absence  of  a  showing  of  fraud,  accident  or 
mistake,  his  determination  is  final.  If  this  is  so,  what  redress 
has  the  state?  Suppose  a  governor  determined  that  bridge 
arbitraries  should  be  deducted  from  charter  line  receipts,  and 
his  judgment  was  wrong  as  a  matter  of  law,  how  could  you 
impeach  it?  To  aver  and  prove  a  mistake  of  law  would  avail 
nothing.  How  could  you  show  either  accident  or  fraud  ?  Neither 
would  be  presumed  because  the  governor  mistook  the  law.  In 
practical  effect,  his  determination  would  be  as  absolute  as  the 
edict  of  a  Czar.  The  framers  of  this  charter  never  intended 
to  lodge  such  power  in  a  single  individual,  regardless  of  whom 
the  individual  might  be. 

If  the  governor  is  authorized,  semi-annually,  as  the  agent 
of  the  state,  to  adjust  the  account  and  determine  what  constitutes 
performance  of  defendant's  charter  obligation,  from  whence 
does  this  authority  arise?  Under  the  constitution  of  1848,  the 
powers  of  the  governor  were  limited  to  the  powers  therein  enumera- 
ted and  such  impHed  powers  as  were  necessary  to  the  exercise  of 
the  enumerated  powers.  It  will  not  be  contended  the  authority 
here  claimed  arises  from  the  general  nature  of  the  office  nor  from 
the  constitution  and  statutes  in  force  at  the  time  the  charter 
was  passed. 

If  the  authority  exists,  it  was  conferred  by  this  charter. 
Your  honors  will  search  this  charter  in  vain  for  an  express 
provision   authorizing  the  governor  to   approve  the  account, 


90 

adjust  the  account,  settle  the  account,  or  determine  the  measure 
of  defendant's  obligation.  It  is  not  there,  and  counsel  admit  it. 
Their  argument  is,  it  must  have  been  intended,  and  therefore 
exists,  as  a  matter  of  construction.  The  settled  doctrine  of  this 
court  is  that  "construction  for  the  purpose  of  conferring  power 
should  be  resorted  to  with  great  caution  and  only  for  the  most 
persuasive  reasons."  (Field  v.  People,  2  Scam.,  105.)  The 
only  reasons  suggested,  persuasive  or  otherwise,  are  those  I  have 
discussed.  The  cases  cited  in  appellee's  brief  involved  powers 
expressly  conferred,  and  for  that  reason  are  not  in  point.  The 
question  here  is,  was  the  power  conferred? 

An  examination  of  this  charter  conclusively  shows  that  its 
framers  were  keen,  intelHgent,  far-sighted  men.  They  were 
building  for  the  future.  The  numerous  and  minute  provisions 
safeguarding  the  revenue  of  the  state,  the  rights  of  the  stock- 
holders and  the  interests  of  the  corporation  warrant  the  conclu- 
sion they  overlooked  very  little. 

If  they  had  intended  to  clothe  the  governor  with  power  to 
reject  or  approve  the  semi-annual  statements,  determine  what 
should  be  performance  and  settle  the  account,  the  charter  would 
have  so  expressly  provided.  A  matter  so  important  would  not 
have  been  overlooked.  From  the  fact  the  charter  does  not  so 
provide,  the  presumption  is  they  did  not  so  intend.  Further- 
more, this  power  is  not  essential  to  the  exercise  of  any  power 
expressly  conferred. 

The  framers  of  this  charter  saw  no  reason  for  vesting  in  the 
governor  the  power  here  claimed,  and  there  was  none.  The  argu- 
ment, that  this  power  is  essential  in  order  to  protect  the  defend- 
ant's stockholders,  enable  the  company  to  know  when  its 
obligation  ends,  and  some  time  or  other  settle  the  account,  sounds 
well  but  means  little.  Under  this  charter,  the  obligation  of  the 
Illinois  Central  will  never  end,  and  never  ought  to  end,  until  it 
pays  what  it  owes.  Whenever  it  does,  no  action  will  be  required 
on  the  part  of  a  governor  to  save  it  harmless  from  further  pay- 
ment. 

The  meaning  of  this  charter,  and  what  amounts  to  perform- 
ance under  it,  must  be  determined  by  the  courts  and  not  by 
the  governors.  If  doubts  arise  as  to  the  meaning  of  gross  income, 
the  allowance  of  expenses,  the  deduction  of  arbitraries,  the  divis- 
ion of  earnings,  or  any  other  matter,  these  doubts  must  be  re- 
solved by  the  courts,  under  the  recognized  principles  of  law. 


91 

If  defendant  has  acted  upon  its  own  interpretation  or  that  of 
governors,  it  has  taken  its  own  chances.  This  charter  means 
today  precisely  what  it  meant  in  1877.  The  construction  placed 
upon  it  by  this  court  now  was  what  it  meant  then.  The  obliga- 
gation  resulting  from  the  meaning  of  this  charter,  as  now  ad- 
judged by  this  court,  was  the  obligation  which  existed  in  1877, 
and  every  year  since.  If  defendant  has  paid  less  than  the 
charter,  as  now  construed  by  this  court,  required,  its  obligation  is 
unperformed — it  yet  owes  the  state — and  neither  a  governor  nor 
any  other  officer  can  either  release  the  defendant,  or  do  what 
amounts  to  the  same  thing — determine  it  does  not  owe. 

Furthermore,  if,  prior  to  the  constitution  of  1870,  any  reasons 
existed  to  support  the  theory  advanced  by  counsel,  no  reasons 
whatever  have  existed  since,  and  the  accounting  sought  begins 
with  1877.  The  right  of  the  people,  in  constitutional  conven- 
tion, to  take  away  power  conferred  by  the  legislature,  upon  a 
governor  or  any  other  officer,  will  not  be  denied  by  any  lawyer. 

The  constitutional  convention  of  1870  submitted  to  the  peo- 
ple— and  the  people  adopted — a  separate  section,  which  reads, 
in  part,  as  follows: 

■  "No  contract,  obligation  or  liability  whatever  of  the  Illinois 
Central  Railroad  Company  to  pay  any  money  into  the  state 
treasury  *  *  *  in  accordance  with  the  provisions  of  the 
charter  of  said  company,  approved  February  10,  in  the  year  of 
our  Lord  1851,  shall  ever  be  released,  suspended,  modified,  al- 
tered, remitted  or  in  any  manner  diminished  or  impaired  by 
legislative  or  other  authority." 

In  the  Goodwin  case,  94  111.,  265,  this  court,  per  Justice 
Walker,  in  referring  to  this  provisioij,  said: 

"By  a  separate  section  of  the  constitution  of  1870  it  is  pro- 
vided that  no  contract,  obligation  or  liability  of  this  company  to 
pay  any  money  into  the  state  treasury,  nor  any  lien  of  the  state 
upon  or  right  to  tax  property  of  the  company  in  accordance  with 
the  provisions  of  the  charter  of  the  company,  shall  ever  be  re- 
leased, suspended,  modified,  altered,  remitted,  or  in  any  manner 
diminished  or  impaired.  *  *  *  This  section  is  of  binding 
force  and  unalterable  by  legislative  action,  and  the  courts  cannot 
do  otherwise  than  enforce  it.  To  do  otherwise  would  be  to  vio- 
late the  obligation  of  the  contract  and  to  disregard  this  require- 
ment of  the  constitution." 

The  words,"  in  accordance  with  the  provisions  of  the  charter," 
as  used  in  this  constitutional  provision,  do  not  mean  in  accord- 


92 

ance  with  the  interpretation  of  a  governor,  a  legislative  com- 
mittee, or  an  accounting  officer  of  the  Illinois  Central.  It  is  idle 
to  so  contend.  They  mean,  in  accordance  with  its  true  and  law- 
ful meaning.  And  the  true  and  lawful  meaning  of  this  charter, 
or  an}''  other  charter,  is  the  meaning  placed  upon  it  by  the  courts. 

Under  this  constitutional  provision,  the  revenue  of  the  state, 
measured  by  the  true  intent  and  meaning  of  this  charter,  is  forever 
guaranteed.  So  measured,  it  can  never  be  released,  remitted, 
diminished  nor  impaired,  either  directly  or  indirectly,  by  any 
authority  whatsoever. 

In  the  face  of  this  provision,  to  say  that  the  governor  can 
construe  this  charter,  determine  the  measure  of  defendant's 
obligation,  settle  the  account,  and  in  the  absence  of  fraud,  acci- 
dent or  mistake  of  fact,  his  judgment,  whether  right  or  wrong, 
as  a  matter  of  law,  binds  the  state  and  absolves  the  defendant, 
is,  to  put  it  mildly,  an  astounding  proposition. 

There  was  no  intention  of  making  the  governor  a  court  or 
clothing  him  with  power  to  determine  what  should  be  perform- 
ance of  defendant's  obligation.  Furthermore,  even  if  the  legis- 
lature did  so  intend,  no  court  in  the  land  would  carry  out  the 
intent. 

The  constitution  provides: 

"The  powers  of  the  government  of  this  state  are  divided  into 
three  distinct  departments — the  legislative,  executive  and 
judicial:  and  no  person  or  collection  of  persons,  being  one  of  these 
departments,  shall  exercise  any  power  properly  belonging  to 
either  of  the  others." 

The  constitution  of  1848  contained  the  same  provision.  The 
power  to  construe  and  interpret  contracts  and  determine  what 
amounts  to  performance  of  them  belongs  to  the  judiciary.  Any 
attempt  to  transfer  this  power  from  the  courts  to  the  governors 
is  absolutely  void. 

The  framers  of  this  charter  were  men  well  versed  in  the  law. 
They  expected  and  believed,  if  doubts  arose  as  to  its  meaning  or 
what  amounted  to  performance  of  it,  resort  at  once  would  be  had 
to  the  courts;  in  other  words,  that  the  true  intent  and  meaning 
of  this  charter  and  what  amounted  to  performance  of  it,  would 
be  determined  in  a  legal  way. 

The  construction  placed  upon  section  18  by  defendant's 
counsel  is  unwarranted  and  strained.  The  purpose  of  this 
section  was  to  provide  the  means  of  compelling  defendant,  every 
six  months,  to  pay  all  that  it  owes;  not  all  that  it  owes  according 


93 

to  the  notions  of  the  particular  individual  who,  for  the  time 
being,  happens  to  be  governor;  not  all  that  it  owes  according  to 
the  holding  of  defendant's  law  department;  not  all  that  it  owes 
according  to  the  views  of  a  legislative  committee,  but  all  that  it 
owes  according  to  the  legal  intent  and  meaning  of  this  charter. 

If  doubts  arise  or  controversies  exist  as  to  its  legal  intent  and 
meaning  or  what  is  embraced  within  its  provisions,  these  ques- 
tions must  be  submitted  to  the  courts.  It  is  no  answer  to  say, 
"this  means  a  lawsuit  every  six  months."  Such  a  contention  is 
simply  absurd.  But  if  it  were  true,  it  would  be  no  answer.  In 
no  other  way  can  the  legal  intent  and  meaning  of  this  charter, 
or  any  other  charter,  be  ascertained  or  declared. 

If  the  governors  have  assumed  to  construe  this  charter  and 
their  construction  was  wrong  as  a  matter  of  law,  whether  it  was 
due  to  fraud,  accident,  mistake,  imposition  upon  the  governor, 
or  ignorance  of  the  law,  can  make  no  difference.  Upon  what 
theory  can  the  state  be  bound  by  a  wrong  construction  put  upon 
this  charter  by  an  officer  who  had  no  right  to  construe  it  ."* 

If  the  Illinois  Central,  instead  of  having  this  charter  con- 
strued by  the  courts  and  its  legal  meaning  declared,  has  acted 
upon  its  own  judgment  or  that  of  the  governors,  and  because  it 
did,  has  paid  less  than  was  due  according  to  its  true  and  legal 
effect,  it  yet  owes  the  state,  and  no  amount  of  argument  can 
avoid  this  conclusion. 

It  is  idle  to  talk  about  practical  construction  or  loudly  pro- 
claim "the  state  has  stood  by  for  fifty  years  and  done  nothing." 
Practical  construction  can  neither  modify  a  line  of  this  charter 
nor  release  a  dollar  due  under  it.  The  state  could  act  only 
through  its  officers.  The  state  is  not  estopped  and  no  laches  is 
imputable  to  it  because  its  officers  failed  to  act.  This  court  has 
repeatedly  declared  that  the  failure  or  refusal  of  its  officers  to  act, 
whether  for  one  year  or  fifty  years,  can  neither  prejudice  nor 
impair  the  rights  of  the  state. 

It  is  no  answer  to  say,  "there  ought  to  be  a  time  when  con- 
troversies end."  The  people  of  this  state,  in  their  sovereign 
capacity,  have  declared  that  this  controversy  shall  never  end 
and  this  charter  obHgation  shall  never  be  satisfied  until  the  Illi- 
nois Central  pays  into  the  treasury  every  dollar  that  it  ever  owed. 

The  purpose  of  section  18  was  to  provide  the  means  of  com- 
pelling defendant  to  pay  a  per  centum  upon  all  of  its  gross  re- 
ceipts. If  any  question  arose  or  doubt  existed  as  to  the  meaning 
of  gross  receipts,  what  should  be  included,  or  as  to  any  other 


94 

question,  it  was  the  duty  of  the  governor  and  the  business  of 
defendant  to  submit  the  matter  to  the  courts  for  legal  determi- 
nation. If  the  governor  failed,  he  neglected  his  duty.  If 
defendant  failed,  it  took  its  own  chances.  It  was  not  the  pur- 
pose of  this  section,  nor  of  any  other  section,  to  furnish  an  oppor- 
tunity to  escape  full  payment  under  the  guise  of  a  stated  account. 

Will  your  honors  kindly  turn  to  section  18?  It  begins  on 
page  27  of  the  abstract.  I  have  read  parts  of  this  section  several 
times,  but  in  this  connection  I  desire  to  read  it  all.  It  provides 
as  follows: 

"Section  18.  In  consideration  of  the  grants,  privileges  and 
franchises  herein  conferred  upon  said  company  for  the  purposes 
aforesaid,  the  said  company  shall,  on  the  first  Mondays  of  Decem- 
ber and  June  in  each  year,  pay  into  the  treasury  of  the  State  of 
Illinois  five  per  centum  on  the  gross  or  total  proceeds,  receipts 
or  income  derived  from  said  road  and  branches  for  the  six  months 
then  next  preceding.  The  first  payment  of  such  per  centage  on 
the  main  trunk  of  said  road  to  commence  four  years  from  the 
date  of  said  deed  of  trust,  and  on  the  branches,  six  years  from  the 
date  aforesaid,  unless  said  road  and  branches  are  sooner  com- 
pleted, then  from  the  date  of  completion.  And  for  the  purpose 
of  ascertaining  the  proceeds,  receipts  or  income  aforesaid,  an 
accurate  account  shall  be  kept  by  said  company,  a  copy  whereof 
shall  be  furnished  to  the  governor  of  the  State  of  Illinois;  the 
truth  of  which  account  shall  be  verified  by  the  affidavits  of  the 
treasurer  and  secretary  of  such  company.  And  for  the  purpose 
of  verifying  and  ascertaining  the  accuracy  of  such  account,  full 
power  is  hereby  vested  in  the  governor  of  the  State  of  Illinois,  or 
any  other  person  by  law  appointed,  to  examine  the  books  and 
papers  of  said  corporation,  and  to  examine,  under  oath,  the 
officers,  agents  and  employees  of  said  company,  and  other  per- 
sons. And  if  any  person,  so  examined  by  the  governor  or  other 
authority,  shall  knowingly  and  wilfully  swear  falsely,  or  if  the 
officers  making  such  affidavits  shall  knowingly  and  wilfully  swear 
falsely  every  such  person  shall  be  subject  to  the  pains  and 
penalties  of  perjury." 

By  this  section,  two  obHgations  are  imposed  upon  defendant. 
The  first  obligation  is  to  pay  into  the  treasury,  on  the  first  Mon- 
days of  December  and  June,  five  per  cent  of  the  gross  receipts. 
This  obligation  is  subject  to  no  conditions.  The  days  of  pay- 
ment are  named,  the  rate  of  per  centum  is  fixed,  and  the  funds 
to  which   the   per   centum   applies   are  expressly   pointed   out. 


95 

Whether  a  copy  of  the  account  is  filed  with  the  governor,  or 
whether  it  is  not,  the  payment  must  be  made.  There  is  no 
power  in  the  governor,  either  through  action  or  non-action,  to 
change  or  postpone  this  obligation.     The  obligation  is  absolute. 

The  court  will  observe  that  under  this  section,  the  semi- 
annual payment  is  not  made  to  the  governor,  nor  through  his 
office,  but  directly  into  the  state  treasury.  The  governor  has 
nothing  to  do  with  the  payment.  He  is  not  consulted  before  it 
is  made.  Neither  the  time  of  making  the  payment,  the  amount 
of  the  payment,  nor  the  manner  in  which  it  is  made,  depends 
upon  the  approval  or  any  other  action  on  the  part  of  the  governor. 

At  or  about  the  time  the  payment  is  made,  a  statement  or 
copy  of  the  account  is  furnished  to  the  governor,  which  shows, 
or  ought  to  show,  the  amount  and  character  of  the  gross  receipts 
upon  which  the  payment  was  computed.  There  is  no  require- 
ment that  the  copy  of  the  account  shall  be  furnished  the  governor 
before  the  payment  is  made.  It  may  as  well  be  after.  It  fre- 
quently occurs  that  a  copy  of  the  account  is  sent  to  the  governor 
and  a  draft  for  the  payment  is  sent  to  the  treasurer  by  the  same 
mail.  And  yet  they  tell  us  a  statement  of  this  character,  upon 
which  no  action  was  or  could  have  been  taken,  affecting  either 
the  manner  or  the  amount  of  the  payment  made,  is  a  stated 
account. 

Recognizing  the  weakness  of  this  contention,  counsel  attempt 
to  bolster  it  up  with  a  presumption.  They  say  the  statements 
were  referred  to  the  auditor  or  filed  in  his  office  by  the  governor; 
that  the  statute  provides  no  money  shall  be  received  by  the  treas- 
urer except  upon  an  order  from  the  auditor,  and  therefore  it 
must  be  presumed  the  statements  were  filed  with  the  auditor  by 
the  governor  for  the  purpose  of  collecting  the  balance  shown  to 
be  due. 

About  all  that  is  necessary  to  refute  this  contention  is  to 
state  it.  There  is  no  requirement  that  the  semi-annual  state- 
ments shall  be  filed  with  the  auditor  or  referred  to  the  auditor. 
All  that  was  necessary  to  obtain  an  order  from  the  auditor  to 
pay  the  money  into  the  treasury  was  a  request  from  the  treasurer. 
The  only  purpose  of  requiring  an  order  is  to  check  up  the  books 
of  the  auditor  and  treasurer.  Furthermore,  the  presumption  is, 
the  semi-annual  payments  were  made  when  due.  The  endorse- 
ments show  that  these  semi-annual  statements  were  neither 
filed  with  the  auditor  nor  referred  to  the  auditor  until  long  after 


96 

the  payments  were  made.  No  action  of  the  auditor  nor  of  any 
other  officer  was  ever  predicated  upon  these  statements. 

The  second  obligation  imposed  upon  defendant  by  section  18 
was  to  keep  an  accurate  account  of  the  gross  proceeds,  receipts 
or  income  and  furnish  the  governor  a  copy  of  the  account, 
verified  by  the  oaths  of  its  treasurer  and  secretary.  While 
the  words  used  are  "the  truth  of  which  account  shall  be  verified 
by  the  affidavits  of  the  treasurer  and  secretary  of  such  company," 
it  is  evident  the  legislature  intended  the  copy  should  be  verified 
rather  than  the  account  itself.  I  do  not  imderstand  that  de- 
fendant's counsel  contend  otherwise. 

The  character  of  the  copy  required  by  this  section  must  be 
determined  by  the  purpose  which  the  legislature  intended  the 
copy  to  subserve.  By  "a  copy  of  the  account,"  I  do  not  believe 
the  legislature  meant  a  transcript  of  all  the  books,  records, 
schedules,  data  and  entries  which  enter  into  and  make  up  the 
account.  Such  a  document  would  be  wholly  impracticable.  If 
the  governor  examined  it,  he  would  have  to  employ  experts, 
and  he  might  as  well  examine  the  books  themselves.  Neither 
do  I  believe  that  by  "a  copy  of  the  account,"  the  legislature 
simply  meant  the  final  ledger  balances  classified  under  the 
different  months.     Such  a  document  would  be  absolutely  useless. 

The  purpose  of  furnishing  the  governor  a  copy  of  the  account 
was  to  afford  him  a  knowledge  of  the  company's  affairs,  an 
insight  into  its  business  methods  and  a  basis  for  speedy  and 
intelligent  investigation.  The  copy  furnished  should  contain 
sufficient  information  to  fairly  and  reasonably  answer  this 
purpose. 

The  copy  of  the  account  should  not  only  show  classified 
totals  and  ledger  balances,  but  how  the  earnings  which  produced 
these  totals  were  made  up,  the  methods  employed  in  dividing 
joint  receipts,  distributing  joint  expenses,  deducting  bridge 
arbitraries,  using  charter  line  terminals,  and  in  a  general  way, 
all  the  methods  employed  which  directly  affected  the  basis  of 
the  account. 

The  copies  of  the  account  furnished  by  defendant  in  no  sense 
whatever  meet  this  requirement.  Will  your  honors  turn  to 
exhibit  "53,"  on  abstract  page  317?  This  exhibit  was  selected 
at  random.  I  could  just  as  well  have  taken  any  one  of  the 
others.  This  is  the  semi-annual  statement  or  copy  of  the 
account  for  the  six  months  ending  April  30,  1903.  The  statement 
ends  April  30,  instead  of  May  31,  the  close  of  the  semi-annual 


97 

period,  for  the  reason  that  a  month  was  required  to  prepare  the 
statement. 

This  semi-annual  payment  was  due  June  1,  1903  and  is 
presumed  to  have  been  made  at  that  time.  According  to  the  file 
marks  which  appear  in  the  last  line  on  the  page,  this  statement 
was  not  filed  in  the  auditor's  office  until  September  16,  1903, 
or  over  three  months  after  the  payment  was  made.  The  affidavit 
was  not  made  either  by  the  treasurer  or  secretary,  and  in  no 
respect  complies  with  the  charter,  but  I  shall  not  take  time  to 
discuss  this  affidavit. 

The  statement  itself  discloses  nothing  but  monthly  totals, 
derived  from  fifteen  different  sources.  Joint  earnings  are  not 
mentioned.  Methods  of  division  are  not  disclosed.  Bridge 
arbitraries  and  charter  line  terminals  are  absolutely  ignored. 
Not  even  a  clue  is  afforded  to  the  methods  or  bases  upon  which 
these  monthly  totals  were  figured.  And  yet  counsel  say,  the 
governor,  by  retaining  this  semi-annual  statement,  approved 
all  the  methods  practiced  by  defendant,  and  the  semi-annual 
statement  thereby  became  a  stated  account. 

Will  your  honors  again  turn  to  abstract  page  28  ?  Section  18, 
after  providing  that  a  copy  of  the  account  shall  be  furnished  the 
governor,  provides  as  follows: 

"And  for  the  purpose  of  verifying  and  ascertaining  the 
accuracy  of  such  account,  full  power  is  hereby  vested  in  the 
governor  of  the  State  of  IlHnois,  or  any  other  person  by  law  ap- 
pointed, to  examine  the  books  and  papers  of  said  corporation, 
and  to  examine,  under  oath,  the  officers,  agents  and  employees  of 
said  company,  and  other  persons." 

The  sentence  just  preceding  relates  to  the  copy.  While  in 
the  last  clause  the  word  "account"  is  used,  as  heretofore  shown, 
and  as  all  of  us  agree,  the  legislature  intended  the  copy  should  be 
verified,  rather  than  the  account  itself.  It  is  equally  clear  that 
when  the  legislature,  in  this  sentence,  used  the  words,  "and  for 
the  purpose  of  verifying  and  ascertaining  the  accuracy  of  such 
account,"  what  it  meant  was  the  accuracy  of  the  copy.  If  the 
legislature  intended  to  confer  upon  the  governor,  regardless  of  the 
copy,  full  power  to  examine  the  account  itself,  why  resort  to  this 
circumlocution?  If  it  so  intended,  it  would  simply  have  said: 
"Full  power  is  hereby  vested  in  the  governor,  or  any  other  person 
appointed  by  law,  to  examine  the  account  and  the  books  and 
papers  of  said  corporation,  together  with  the  officers,  agents  and 
other  persons,  under  oath." 

(7) 


98 

"Verify,"  according  to  its  usual  and  ordinary  meaning  and 
according  to  the  first  definition  by  Webster,  means  "to  prove  to 
be  true;  to  establish  the  truth  of;  to  confirm  as  by  comparison 
with  facts;  to  substantiate,  as  by  reasoning;  as  to  verify  an  ac- 
count or  a  statement;  to  verify  a  theory." 

For  some  reason  counsel  treat  the  word  "ascertain,"  the 
second  word  used,  as  more  important  than  the  word  "verify," 
the  first  word  used. 

The  use  of  the  word  "verify"  and  the  connection  in  which  the 
word  is  used,  clearly  shows  that  what  the  legislature  had  in  mind 
was  the  copy  of  the  account,  and  not  the  account  itself.  To  say, 
this  construction  means  that  the  governor  shall  act  simply  as  a 
clerk  in  adding  up  the  figures  or  merely  as  a  reporter  in  taking 
down  the  evidence,  is  simply  nonsense. 

As  heretofore  shown,  the  legislature  intended  that  the  copy 
of  the  account  furnished  the  governor  should  not  only  disclose 
the  monthly  receipts,  but  the  methods  employed  to  produce  the 
receipts.  It  furthermore  intended,  if  the  information  con- 
tained in  the  copy  furnished  was  not  sufficient  to  satisfy  the  gov- 
ernor that  the  receipts  reported  were  all  of  the  receipts,  or  the 
methods  disclosed  were  honest  and  fair,  he  should  examine  the 
books  and  papers  themselves,  and  the  officers  and  agents,  under 
oath,  for  the  purpose  of  finding  out.  These  copies  of  the  account 
bear  no  relation  to  any  known  theory  of  stated  accounts. 

No  action  is  contemplated  upon  these  statements  before  the 
semi-annual  payments  are  made.  The  exhibits  show  that  some 
of  the  statements  were  endorsed  by  the  governor  ' '  examined  and 
approved."  No  provision  can  be  found  authorizing  such  ap- 
proval.    The  approval  was  meaningless. 

Counsel  say  a  balance  was  shown  to  be  due  by  each  semi- 
annual statement,  and  since  the  governor  received  and  retained 
the  statement  without  objection,  the  law  presumes  he  accepted 
the  balance  in  full  settlement.  Nothing  like  a  balance,  in  any 
sense,  was  either  shown  or  required  to  be  shown  upon  these  semi- 
annual statements.  All  that  appears  is  a  mere  computation  of 
seven  per  cent  on  the  earnings  included,  and  this  was  not  required. 
To  say,  because  the  governor  retained  a  statement  which  the  law 
reqmred  should  be  furnished  to  him,  he  thereby  approved  the 
statement,  is  not  the  law  and  never  was. 

Furthermore,  no  action  was  ever  taken  upon  these  statements. 
Counsel  say,  the  law  presumes  the  governors  did  their  duty  and 


99 

made  whatever  investigation  was  necessary  to  an  intelligent 
determination. 

The  bill  avers  and  the  demurrers  admit  that  not  one  of  these 
semi-annual  statements  was  verified  either  by  an  investigation  of 
the  books  or  an  examination  of  witnesses.  The  statements 
themselves  show  that  no  examination  was  possible.  All  that 
was  done  was  to  glance  at  the  statements,  pick  up  a  pen  and 
mark  them  "approved,"  and  pass  them  on  to  the  auditor  in 
order  to  get  rid  of  them. 

Will  your  honors  turn  to  exhibit  "5",  abstract  page  269? 
This  statement  was  sworn  to  in  Chicago  by  John  C.  Welling, 
before  Jesse  W.  Ott,  a  Notary  Public,  on  June  26,  1879.  Mark 
the  date,  June  26.  Whether  it  was  sent  from  Chicago  by  mes- 
senger or  by  mail,  in  the  usual  and  ordinary  course  of  business, 
the  governor  did  not  receive  it  until  the  next  day,  or  June  27. 
The  statement  shows  it  was  "examined  and  approved"  on  June 
27,  the  very  day  it  was  received. 

And  yet  we  are  told,  the  court  must  presume  that  Governor 
Cullom,  between  the  morning  of  June  27  and  sometime  in  the 
afternoon,  took  up  this  abstract  of  monthly  receipts  which 
showed  nothing  but  classified  totals,  deciphered  the  basis  of 
dividing  joint  earnings,  the  methods  employed  between  the 
different  lines,  compared  it  with  the  books,  and  intelligently 
determined  that  $149,635.42  was  all  the  company  owed. 

They  say  we  are  smirching  Governor  Cullom.  If  it  was  true, 
this  would  be  no  answer.  But  it  is  not  true.  Defendant's  counsel 
will  get  up  no  issue  with  me  over  the  honesty  of  Shelby  M.  Cul- 
lom. I  have  followed  his  banner  for  thirty  years  and  expect  to 
follow  it  as  long  as  it  waves.  For  half  a  century  he  has  repre- 
sented the  people  and  moved  in  the  public  gaze.  In  his  record 
there  is  no  dishonor.  Around  his  name  there  lurks  no  scandal. 
Upon  his  memory  will  rest  no  stain.  When  his  days  go  out,  the 
people  of  Illinois  will  write  as  his  epitaph:  "He  was  an  honest 
man,  a  patriotic  citizen,  a  faithful  servant,  a  wise  counsellor, 
a  practical  statesman.  He  never  knowingly  forsook  the  people, 
betrayed  a  trust,  nor  deserted  a  cause." 

But  neither  Shelby  M.  Cullom  nor  any  other  governor  was 
perfect.  From  the  days  of  Bond  to  the  days  of  Deneen,  they 
have  made  mistakes.  But  because  they  have,  they  were  not 
dishonest. 

By  section  18,  the  governor  is  authorized  to  examine  the 
books,  but  this  duty  is  not  mandatory.     A  failure  to  perform  it 


100 

is  neither  misfeasance  nor  malfeasance.  The  bill  simply  avers 
this  duty  was  not  performed. 

It  avails  nothing  upon  this  argument  to  travel  out  of  the 
record  and  insinuate  that  investigations  were  made.  Let  them 
answer  the  bill  and  set  up  these  assertions.  Whenever  they  do, 
the  state  vv^ill  show  the  governors  were  imposed  upon;  that  the 
investigations  made  were  nothing  but  farces ;  that  the  accountants 
employed  to  represent  the  state  were  "wined  and  dined"  by  the 
Illinois  Central,  and  the  reports  written  were  dictated  by  the 
company's  own  officials. 

The  contention,  that  these  copies  of  the  account  or  so-called 
semi-annual  statements  are  stated  accounts,  ignores  principles 
of  law  which  are  absolutely  settled  in  this  state.  A  stated  ac- 
count is  a  new  contract,  and  any  stiit  brought  thereon  must  he  upon 
the  new  contract. 

In  Dick  V.  Zimmerman,  207  111.,  639,  this  court,  per  Justice 
Scott,  said: 

"  In  an  action  upon  an  account  stated,  the  original  form  or  evi- 
dence of  the  debt  is  unimportant,  for  the  stating  of  the  account 
changes  the  character  of  the  cause  of  action,  and  is  in  the  nature 
of  a  new  undertaking.  The  action  is  founded,  not  upon  the 
original  contract,  but  upon  the  promise  to  pay  the  balance 
ascertained." 

In  Sutphen  v.  Cushman.  35  111.,  199,  this  court,  per  Justice 
Beckwith,  said: 

"The  settling  and  stating  of  an  account  between  the  parties 
changed  the  character  of  the  indebtedness." 

The  only  way  you  can  change  the  character  of  an  indebted- 
ness is  by  making  a  new  contract. 

Many  other  decisions  of  this  court  are  cited  in  our  brief.  The 
attempt  of  counsel  to  wipe  out  these  decisions  by  simply  saying, 
"the  court  was  talking  about  the  remedy,"  is  idle.  The  doctrine 
announced  in  these  cases  is  that  the  stating  of  an  account  is  a  new 
undertaking,  a  new  agreement,  a  new  contract,  and  any  suit  brought 
on  the  stated  account  is  on  the  new  contract  instead  of  the  old — and 
this  doctrine  is  sound.  Furthermore,  it  is  sanctioned  by  many 
other  courts. 

In  vState  v.  Brown,  10  Oregon,  215,  the  State  of  Oregon 
sought  to  recover  a  large  sum  of  money  which  it  claimed  had 
been  paid  by  mistake  to  Brown  during  his  official  term  as  state 
printer.  It  was  contended  by  Brown  that  his  claims  had  been 
allowed  and  warrants  drawn  therefor  by  the  secretary-  of  state, 


101 

who  was  ex-officio  state  auditor,  and  were  therefore  stated  and 
settled  accounts.     The  warrants  had  been  paid. 

The  statute  of  Oregon  provided  the  secretary  of  state  should 
superintend  the  fiscal  concerns  of  the  state;  examine  and  de- 
termine the  claims  of  all  persons  against  the  state;  endorse  upon 
the  claims  the  amounts  due  and  allowed  and  draw  warrants 
therefor  upon  the  treasury.  It  expressly  authorized  the  secre- 
tary to  swear  the  claimants  and  any  other  persons  and  examine 
them  either  orally  or  in  writing  as  to  any  facts  relating  to  the 
justice  of  the  claims.  Under  the  statute  of  Oregon,  the  secretary 
of  state  had  much  greater  powers  than  are  vested  in  the  governor 
by  this  charter.  In  passing  upon  the  question  of  stated  accounts, 
the  court  said: 

"Another  point  contended  for  by  the  appellant  is  that  if  the 
auditing  and  allowance  of  a  claim  by  the  secretary  should  be 
.  deemed  to  be  of  no  effect  as  a  judicial  determination,  still  it 
would  operate  to  convert  the  same  into  an  account  stated,  and 
bar  any  recovery  in  an  action  at  law  where  a  mistake  only  is 
alleged;  but  a  stated  account  in  this  sense  derives  all  of  its  force 
from  the  agreement  of  the  parties,  express  or  implied.  It  is  in 
effect  a  new  contract  in  writing,  and  is  equally  conclusive  in  an 
action  at  law,  but  it  presupposes  parties  capable  of  making  a 
written  contract  which  will  bind  them  in  the  absence  of  fraud  or 
mistake,  although  one  or  both  may  have  relinquished  valid 
demands  to  secure  the  settlement,  which,  if  they  had  been  allowed 
would  have  sensibly  affected  the  balance. 

"  In  the  case  here  there  was  no  opportunity  for  any  agreement. 
The  secretary  did  not  and  could  not  have  entered  into  any 
contract  with  the  claimant.  He  was  authorized  to  allow  just 
what  was  due  the  claimant  according  to  his  judgment  and  was 
not  justified  in  allowing  anything  beyond.  If  the  state  had 
contracted  to  pay  so  much,  the  secretary's  power  to  audit  the 
claim  and  ascertain  what  should  be  due  thereon  did  not  authorize 
him  to  enter  into  a  new  contract  with  the  claimant  through  the 
form  of  a  stated  account  by  which  the  latter  might  assert  a  claim  to 
a  greater  amount  than  should  be  found  due  him  under  his  original 
contract  with  the  state.  We  think  the  secretary  has  no  power  to 
state  an  account  with  the  claimant  which  will  bind  the  state." 

This  decision  is  nothing  more  nor  less  than  the  intelHgent 
application  of  principles  uniformly  recognized  by  this  court, 
from  the  4th  Oilman  to  the  present  time.  They  absolutely 
dispose  of  defendant's  contention  that  these  semi-annual  state- 


102 

ments  are  stated  accounts.  To  so  hold,  means  the  governor  of 
Illinois  can  change  the  obligation  imposed  by  this  charter  and 
make  a  new  contract  with  the  Illinois  Central.  In  my  humble 
opinion,  no  court  in  the  land  will  ever  so  hold  as  long  as  the 
constitution  stands,  wherein  it  is  written; 

"No  contract,  obligation  or  liability  whatever  of  the  Illinois 
Central  Railroad  Company  to  pay  any  money  into  the  state 
treasury  *  *  *  j^  accordance  with  the  provisions  of  the 
charter  of  said  company,  *  *  *  shall  ever  be  released,  sus- 
pended, modified,  altered,  remitted,  or  in  any  manner  diminished 
or  impq,ired  by  legislative  or  other  authority." 

THE  STATE  TAX  QUESTION. 

The  second  point  raised  by  the  demurrer  to  the  bill  as  a 
whole  is  that  no  state  tax  was  assessed  upon  the  stock,  property 
and  assets  of  defendant  for  any  of  the  years  prior  to  1905,  and 
hence  nothing  can  be  recovered  in  addition  to  five  per  cent  of  the 
gross  receipts. 

Section  18  of  the  charter  provides  that  defendant  shall  pay 
into  the  state  treasury,  on  the  first  Mondays  of  December  and 
June,  five  per  centum  on  the  gross  receipts  derived  from  the  road 
and  branches  for  the  six  months  then  next  preceding. 

Section  22  provides  that  after  six  years,  the  stock,  property 
and  assets  of  defendant  shall  be  listed  with  the  auditor,  and  an 
annual  tax  for  state  purposes  shall  be  assessed  thereon  by  the 
auditor;  that  whenever  the  taxes  levied  for  state  purposes 
exceed  three-fourths  of  one  per  centum,  such  excess  shall  be 
deducted  from  the  gross  receipts;  that  the  revenue  arising  from 
said  taxation  and  the  said  five  per  cent  of  the  gross  receipts  shall 
be  paid  into  the  state  treasury  in  money  and  applied  to  the  pay- 
ment of  the  state  indebtedness ;  that  in  case  the  -five  per  cent  and 
the  state  taxes  in  any  year  do  not  amount  to  seven  per  cent  of  the 
gross  receipts  of  the  charter  lines,  then  defendant  shall  pay  into 
the  treasury  the  difference,  so  as  to  make  the  whole  amount  paid 
equal  at  least  to  seven  per  cent  of  such  gross  receipts.  In  other 
words,  in  case  the  state  tax,  in  any  year,  does  not  amount  to  two 
per  cent  of  the  gross  receipts,  enough  must  be  added  to  the  state 
tax  to  make  it  amount  to  two  per  cent,  so  that  the  whole  amount 
paid  shall  be  equal  at  least  to  seven  per  cent  of  the  gross  receipts. 

The  bill  avers  that  during  each  and  every  year,  from  1859  to 
1905,  the  defendant  failed  to  list  its  property  with  the  auditor 
for  taxation,  and  the  auditor  failed  to  assess  a  state  tax  thereon; 


103 

that  the  reason  for  this  failure  was  that  both  the  defendant  and 
he  auditor  knew  that  a  state  tax  levied  upon  the  stock,  property 
and  assets  of  defendant  would  not  amount  to  two  per  cent  of  the 
gross  receipts  of  the  charter  lines.  In  other  words,  that  five 
per  cent  of  the  gross  receipts  and  the  state  tax  would  not  amount 
to  seven  per  cent  of  the  gross  receipts  of  the  charter  lines,  the 
minimum  amount  which  defendant  must  pay.  They  evidently 
believed  that  since  the  tax,  if  levied,  could  make  no  possible 
difference  in  the  amount  of  the  payment  required,  to  levy  the 
tax  would  be  an  idle  ceremony. 

In  their  view,  the  state  was  not  so  much  concerned  about  the 
observance  of  the  formalities  prescribed  by  the  charter  as  it  was 
in  securing  the  full  amount  of  money  due  under  the  charter,  and 
so  long  as  defendant  was  not  required  to  pay  more  than  seven  per 
cent  of  its  gross  receipts,  it  was  a  matter  of  indifference  to  it 
whether  the  form  of  levying  a  tax  was  gone  through  with  or  not. 

For  this  reason  the  defendant,  instead  of  listing  its  property 
with  the  auditor  and  paying  into  the  treasury  five  per  cent  of  its 
gross  receipts,  a  state  tax  and  the  difference  between  the  sum  of 
these  two,  and  seven  per  cent  of  its  gross  receipts,  paid  into  the 
treasury,  semi-annually,  in  a  lump  sum,  seven  per  cent  upon  what 
it  claimed  and  reported  to  be  the  gross  receipts  of  the  charter  lines. 

The  semi-annual  statements  have  already  been  discussed. 
In  each  one  of  these  semi-annual  statements,  the  defendant 
claimed  and  pretended  to  include  the  gross  or  total  receipts 
derived  from  the  charter  Hnes  for  the  semi-annual  period.  In 
every  instance,  upon  the  total  receipts  included  in  these  semi- 
annual statements,  the  defendant  computed  seven  per  cent  and 
paid  the  amount  so  computed  into  the  state  treasury. 

A  computation  was  made  upon  the  statements  themselves 
by  defendant's  own  offfcers.  Will  your  honors  turn  to 
exhibit  "3,"  on  abstract  page  267  ?  This  is  the  first  semi-annual 
statement  which  is  made  an  exhibit.  This  statement  purports 
to  show  all  of  the  charter  line  receipts  for  the  six  months  ending 
April  30,  1878.  The  total  amount  of  these  receipts  was 
$2,160,421.99.  Below  the  recapitulation  and  above  the  affidavit 
you  find  the  following:  "Seven  per  cent  upon  which  is  $151,- 
229.54."  The  amount  thus  computed  was  paid  into  the  treasury. 
Take  exhibit  "4  "  on  the  next  page,  and  you  find  the  same  thing. 
Take  any  one  of  these  semi-annual  statements,  from  1877  to 
1906,  and  you  find  the  same  thing.  During  this  entire  period, 
the  defendant  paid  into  the  state  treasury  seven  per  cent  on  what 


104 

it  claimed  and  reported  to  be  the  gross  receipts  of  the  charter 
lines  as  and  for  a  compliance  with  sections  18  and  22. 

In  1905  the  state  discovered  that  these  semi-annual  state- 
ments were  false  and  fraudulent,  and  that  millions  of  dollars  of 
charter  line  receipts  had  been  omitted  from  these  semi-annual 
statements,  upon  which  the  state  had  received  no  per  centum. 
This  bill  was  filed  to  compel  the  defendant  to  account  for  and  pay 
into  the  treasury  seven  per  cent  on  the  gross  receipts  of  the  char- 
ter lines,  which  were  wholly  omitted  from  these  semi-annual 
statements. 

The  defendant  now  insists  that  because  it  failed  to  list  its 
property  with  the  auditor  and  because  the  auditor  failed  to 
assess  a  state  tax,  this  bill  will  not  lie.  Its  contentions,  in 
substance,  are: 

1.  That  there  is  no  obligation  imposed  by  the  charter  to 
pay  seven  per  cent  of  the  gross  receipts,  but  the  obligation  is  to 
pay  five  per  cent  of  the  gross  receipts,  a  state  tax,  and  the  differ- 
ence between  the  sum  of  these  two  and  seven  per  cent  of  the 
gross  receipts. 

2.  That  the  state  tax  required  to  be  paid  by  section  22  is  a 
tax  in  the  strict  sense,  and  is  referable  to  the  taxing  power. 

3.  That  this  payment,  being  a  tax,  valuation  and  assess- 
ment are  essential  to  its  collection;  that  since  defendant's 
property  was  not  listed  with  the  auditor  and  no  state  tax  was 
assessed  thereon,  a  bill  will  not  lie  to  collect  either  the  tax  itself 
or  any  equivalent  or  substitute  therefor,  and  furthermore,  the 
right  to  collect  the  tax  is  expressly  waived  in  the  bill. 

4.  That  there  can  be  no  accounting  for  five  per  cent  of  the 
gross  receipts,  because  the  bill  does  not  allege  that  the  amounts 
actually  paid  b}'-  defendant  were  less  than  five  per  cent  of  the 
gross  receipts,  including  those  omitted  from  the  semi-annual 
statements,  and  no  accounting  is  demanded  for  five  per  cent. 

5.  That  when  defendant  paid  seven  per  cent  upon  the  gross 
receipts  included  in  its  semi-annual  statements,  it  paid  two  per 
cent  more  upon  said  receipts  than  the  charter  required,  and  the 
court  must  presume  this  additional  two  per  cent  was  paid  by 
defendant  and  accepted  by  the  state,  in  full  satisfaction  of  all 
the  per  centum  then  due  the  state  upon  charter  line  receipts 
which  were  not  reported. 

These  contentions  ignore  both  the  letter  and  spirit  of  the 
most  important  provision  of  section  22.  This  provision  reads 
as  follows: 


105 

"Provided,  in  case  the  five  per  cent  provided  to  be  paid  into 
the  state  treasury  and  the  state  taxes  to  be  paid  by  the  corpora- 
tion do  not  amount  to  seven  per  cent  of  the  gross  or  total  pro- 
ceeds, receipts  or  income,  then  the  said  company  shall  pay  into 
the  state  treasury  the  difference,  so  as  to  make  the  whole  amount 
paid  equal  at  least  to  seven  per  cent  of  the  gross  receipts  of  said 
corporation." 

In  the  language  of  Judge  Dickinson,  "as  well  might  Antonio 
have  attempted  to  rail  the  seal  off  the  bond,"  as  for  counsel  to 
attempt  to  expunge  from  section  22  this  significent  and  control- 
ling provision. 

Because  this  part  of  section  22  is  a  proviso,  does  not  weaken  it. 
While  the  usual  office  of  a  proviso  is  to  limit,  and  not  enlarge, 
when  the  language  is  clear  and  the  intent  manifest,  it  is  treated 
and  construed  as  affirmative  legislation.  This  doctrine  is 
settled  in  Illinois.  In  the  case  of  In  Re  Day,  181  111.,  80,  in 
construing  a  proviso,  this  court,  per  Justice  Cartwright,  said: 

"There  is  authority,  however,  for  holding  that  the  intention 
of  the  legislature,  if  plainly  expressed,  is  to  have  the  force  of  law, 
although  in  the  form  of  a  proviso,  and  we  will  treat  this  proviso 
as  an  enactment  in  itself.'' 

This  proviso  is  the  only  provision  of  the  entire  charter  which 
definitely  fixes  the  minimum  amount  which  defendant  must  pay. 
Furthermore,  it  is  the  very  last  expression  of  the  legislature  upon 
the  subject  of  the  state's  revenue,  and,  under  the  settled  rules  of 
construction,  must  therefore  control. 

The  language  of  this  proviso  is  plain.  The  words,  "so  as  to 
make  the  whole  amount  paid  equal  at  least  to  seven  per  cent  of  the 
gross  receipts,"  can  neither  be  distorted  nor  misunderstood.  The 
intent  here  manifest,  that  defendant  shall  pay  at  least  seven  per 
cent  of  the  gross  receipts,  overshadows  and  outweighs  every 
other  provision  which  has  any  bearing  upon  the  payments  re- 
quired. The  making  of  this  payment  which,  under  any  and  all 
circumstances,  must  equal  at  least  seven  per  cent  of  the  gross 
receipts,  is  the  real  and  ultimate  thing  required. 

Counsel  say,  this  proviso  does  not  relieve  defendant  from  its 
obligation  to  pay  five  per  cent  and  the  state  tax ;  that  these  obli- 
gations still  continue.  This  means,  if  it  means  anything,  that 
when  you  satisfy  the  whole  of  an  obUgation,  you  do  not  satisfy 
all  of  its  parts. 

Under  the  constitution,  the  obligation  imposed  by  this  pro- 
viso to  pay  into  the  state  treasury  at  least  seven  per  cent  of  the 


106 

gross  receipts,  can  never  be  released,  suspended,  modified,  re- 
mitted, nor  in  any  manner  diminished  or  impaired  by  legislative 
or  other  authority.  And  yet  we  are  told,  because  the  defendant 
failed  to  list  its  property  and  because  the  auditor  failed  to  assess 
a  tax,  two-sevenths  of  this  entire  obligation  has  been  absolutely 
and  forever  released ;  that  no  bill  can  be  drawn,  which  states  the 
facts,  under  which  a  recovery  can  now  be  had  for  a  single  dollar 
more  than  the  five  per  cent.  In  other  words,  in  spite  of  the  con- 
stitution, by  failing  to  perform  a  duty  enjoined,  the  Illinois  Cen- 
tral and  the  auditor  of  state  can  change  the  measure  of  this  obli- 
gation from  seven  per  cent  to  five  per  cent. 

Counsel's  entire  argument  is  based  upon  a  misapprehension 
of  the  legislative  purpose  in  the  enactment  of  sections  18  and  22. 
Their  notion  is,  the  sole  object  of  the  legislature  in  adopting  these 
sections  was  to  require  three  separate  and  distinct  kinds  of  pay- 
ment, viz.,  five  per  cent  of  the  gross  receipts,  a  state  tax  and  a 
difference.  A  more  aimless  intent  was  never  imputed  to  a 
legislature. 

What  possible  difference  could  it  make  to  the  state  whether 
or  not  the  revenue  paid  was  a  per  centum  as  such,  a  tax  as  such, 
and  a  difference  as  such  ?  Under  the  charter,  all  of  this  revenue 
goes  into  the  treasury,  is  there  commingled  and  appropriated  to 
one  object.  Why  enact  provisions  merely  to  create  three  separate 
and  distinct  kinds  of  payment? 

Counsel  say,  in  their  brief: 

"The  state  does  not  perceive  that  an  agreement  to  pay  five 
per  cent,  the  state  tax,  and  the  difference,  if  any,  between  their 
sum  and  a  third  sum,  is  not  an  agreement  to  pay  such  third  sum, 
independent  of  the  items  composing  it." 

We  admit  the  accusation.  We  confess  that  our  perception 
is  not  keen  enough  and  our  imagination  is  not  vivid  enough  to 
recognize  any  substantial  difference  between  paying  into  the 
treasury,  in  a  lump  sum,  one  hundred  dollars,  and  paying  into 
the  treasury  fifty  dollars  and  twenty  dollars  and  the  difference 
between  the  sum  of  these  amounts  and  one  hundred  dollars. 

In  adopting  these  sections,  what  the  legislature  had  in  mind 
was  the  amount  of  revenue  to  be  secured  to  the  state  and  not  the 
particular  kinds  of  payment. 

The  framers  of  this  charter  believed  that  the  Illinois  Central, 
in  consideration  of  the  grant  of  lands  and  the  privileges  con- 
ferred, should  pay  into  the  treasury  at  least  seven  per  cent  of  its 
gross  receipts.     But  they  furthermore  believed  the  time  would 


107 

come  when  it  ought  to  pay  more.  So  believing,  their  object  was 
to  devise  a  plan  under  which  the  company  could  never  pay  less 
than  seven  per  cent,  but  might  be  required  to  pay  more. 

This  object  could  not  be  attained  by  a  definite  per  centum 
upon  the  gross  receipts  alone.  The  framers  knew  the  charter 
would  be  a  contract ;  that  if  a  definite  per  centum  alone  was  pro- 
vided, the  Illinois  Central  could  never  be  required  to  pay  any- 
thing more  than  the  per  centum  fixed.  For  these  reasons,  and 
not  for  the  purpose  of  providing  three  separate  and  distinct  kinds 
of  payment,  they  adopted  sections  18  and  22. 

Section  18  provides  that  the  company  shall  pay  into  the  state 
treasury,  semi-annually,  five  per  cent  of  its  gross  receipts. 

Section  22  provides:  first,  that  the  company  shall  list  with  the 
auditor,  annually,  its  stock,  property  and  assets;  that  the  auditor 
shall  assess  a  state  tax  thereon,  and  the  revenue  arising  from  the 
per  centum  and  the  tax  shall  be  paid  into  the  treasury  and  ap- 
plied to  the  payment  of  the  state  indebtedness;  second,  that  in 
case  the  five  per  centum  and  the  tax  do  not  amount  to  seven  per 
cent  of  the  gross  receipts,  then  the  company  shall  pay  into  the 
treasury  the  difference,  so  as  to  make  the  whole  amount  paid  equal 
at  least  to  seven  per  cent  of  the  gross  receipts. 

Through  the  scheme  enacted  by  these  provisions,  the  intent 
of  the  framers  of  this  charter  was  intelligently  carried  out.  Un- 
der this  scheme,  the  Illinois  Central  can  never  pay  less  than  seven 
per  cent,  but  when  the  time  comes,  if  it  ever  does,  that  five  per 
cent  of  its  gross  receipts  and  a  state  tax  exceed  seven  per  cent  of 
its  gross  receipts,  it  must  pay  more.  You  can  theorize  until  the 
end  of  time,  and  no  other  fair  or  intelligent  meaning  can  be  given 
these  sections. 

The  provisions  for  listing  defendant's  property  and  levying  a 
state  tax,  are  provisions  wholly  for  the  benefit  of  the  state,  and  the 
state  alone  can  complain  of  their  non-observance. 

The  intention  of  the  framers  of  the  charter  was,  that  defend- 
ant should  pay  into  the  state  treasury  the  full  amount  which  any 
other  corporation  would  be  required  to  pay  as  state  taxes,  if  its 
property  were  listed  and  the  taxes  were  levied  in  the  manner 
prescribed  in  defendant's  charter.  It  was  also  their  intention 
that  out  of  the  total  seven  per  cent  of  its  gross  receipts — which 
must  be  paid  in  any  event — the  defendant  might  use  the  neces- 
sary amount,  not  exceeding,  however,  two  per  cent,  in  the  pay- 
ment of  such  taxes. 


108 

There  was  no  way  for  the  state  to  secure  to  itself  the  benefit 
of  the  payment  by  defendant  of  any  excess  of  its  taxes,  over  two 
per  cent  of  the  gross  receipts,  except  by  providing  for  the  assess- 
ment of  defendant's  property  and  the  levying  of  the  tax.  If 
the  tax  does  not  amount  to  two  per  cent  of  the  gross  receipts,  the 
state  gains  nothing  by  the  levy.  Had  it  been  certain  that  a  state 
tax  upon  defendant's  property  would  never  exceed  two  per  cent 
of  the  gross  receipts,  no  provision  at  all  would  have  been  made 
for  the  levy  of  the  tax.  But  this  was  not  certain.  On  the  con- 
trar}^  the  legislature  believed  the  time  would  come  when  the  tax 
would  exceed  two  per  cent,  and  they  furthermore  believed  when 
such  time  came,  the  defendant  should  pay,  for  the  privileges  en- 
joyed, more  than  seven  per  cent  upon  its  gross  receipts.  For 
this  reason,  and  for  this  reason  alone,  it  provided  for  the  listing 
of  defendant's  property  and  the  levying  of  a  state  tax.  This  pro- 
vision was  made  for  the  sole  benefit  of  the  state. 

In  no  event  and  under  no  circumstances  could  any  advantage 
or  benefit  be  derived  by  defendant,  under  the  charter,  from  the 
levy  of  this  tax.  The  only  instance  in  which  the  levy  of  the  tax 
could  make  any  possible  difference  to  defendant  would  be  where 
the  tax  exceeded  two  per  cent  of  the  gross  receipts,  and  this  differ 
ence  would  be  against  the  defendant  instead  of  in  its  favor. 

This  provision  for  the  listing  of  defendant's  property  and  the 
levying  of  a  state  tax,  being  for  the  sole  benefit  and  advantage  of 
the  state,  the  same  rule  applies  as  in  any  other  like  case.  The 
rule  is — and  no  rule  is  better  settled  in  this  court — that  no  party 
to  a  contract  can  complain  of  the  non-obsei-vance  of  a  provision 
of  it  which  is  wholly  for  the  benefit  of  the  opposite  party. 

An  argument  founded  upon  the  assumption  that  defendant 
can  take  advantage  of  a  failure  to  enforce  a  provision  of  this 
charter,  from  which  it  could  have  gained  no  possible  benefit;  a 
provision,  the  enforcement  of  which  can  only  result  in  advantage 
to  the  state  and  disadvantage  to  itself,  is  an  argument  founded 
upon  the  sand. 

Counsel  furthermore  assume  that  the  state  tax  provided  in 
section  22  is  a  tax  in  the  strict  constitutional  sense;  that  since  this 
is  true,  valuation  and  assessment  are  essential  to  its  enforcement, 
and  these  essentials  cannot  be  waived  either  by  the  defendant  or 
the  auditor,  or  both,  and  a  bill  be  filed  to  collect  the  tax  or  an 
equivalent  therefor.  If  their  premise  is  true,  their  conclusions 
follow,  and  it  will  not  be  necessary  to  discuss  the  steps  essential 
to  the  enforcement  of  a  constitutional  tax. 


109 

In  support  of  their  contention,  that  the  payment  required  by- 
section  22  is  a  tax  in  the  strict  sense,  counsel  cite  an  opinion 
rendered  by  me  in  1906  to  the  auditor  of  public  accounts.  I 
want  to  assure  both  counsel  and  the  court  that  if  I  now  believed 
this  opinion  was  wrong,  it  would  not  embarrass  me  in  the  least 
to  say  so.  Former  opinions  have  no  terrors  for  me.  During  my 
career  as  attorney  general,  I  have  had  to  back  up  on  a  number  of 
occasions.  Unless  I  either  die  or  resign — and  I  hope  I  won't  die 
and  I  know  I  won't  resign — in  all  probability  I  will  back  up  again. 

Two  questions  were  submitted  to  me  by  the  auditor.  These 
questions  were: 

1.  Should  the  state  tax  rate  be  extended  against  the  full 
value  of  defendant's  stock,  property  and  assets,  or  against  the 
one-fifth  or  assessed  value? 

2.  In  the  assessment  of  defendant's  property  by  the  auditor, 
do  the  provisions  of  the  general  revenue  laws  as  to  credits  and 
deductions  apply? 

In  answer  to  these  questions,  I  held  that  the  rate  should  be 
extended  against  the  assessed  or  one-fifth  valuation,  and  such 
deductions  should  be  allowed  from  credits  as  the  general  revenue 
laws  provide.  In  discussing  the  first  question,  I  expressed  the 
view  that  it  was  the  duty  of  defendant  to  list  its  property  annual- 
ly with  the  auditor  for  state  taxation ;  that  it  was  the  duty  of  the 
auditor  to  assess  a  state  tax  thereon,  and  in  the  event  the  defend- 
ant failed  to  list  its  property,  it  was  the  duty  of  the  auditor  to 
assess  the  tax  under  the  act  of  1859. 

No  question  was  before  me  as  to  whether  the  obligation  to 
pay  the  tax  grew  out  of  the  taxing  power  or  grew  out  of  contract. 
I  am  frank  to  say,  when  the  opinion  was  given,  so  far  as  I  was 
concerned,  this  question  had  never  been  thought  of.  It  is 
possible  that  expressions  can  be  found  in  this  opinion,  which, 
wholly  disconnected  from  the  questions  submitted,  may  afford 
defendant's  counsel  some  little  consolation.  If  so,  they  are 
welcome  to  it. 

Whoever  reads  this  opinion  as  a  whole,  will  find  that  its 
dominating  idea  is,  that  the  charter  requires  defendant  to  Ust 
its  property  and  pay  a  state  tax,  and  since  no  method  of  assess- 
ment and  no  basis  of  valuation  were  prescribed  by  the  charter,  the 
legislature  intended  the  property  should  be  assessed  in  the  same 
manner  and  upon  the  same  basis  as  any  other  like  property. 

I  believed  this  opinion  was  right  then  and  I  believe  so  now. 
I  believed  then  and  believe  now  that  under  section  22  the  defend- 


no 

ant  must  list  its  property  for  taxation  and  the  auditor  must 
assess  a  state  tax  thereon.  This  provision  was  enacted  for  the 
benefit  of  the  state.  Its  enforcement  is  essential  to  the  interests 
of  the  state. 

The  state  is  entitled,  each  and  every  year,  to  have  the  tax 
measured  and  determined  under  its  general  revenue  laws,-  as 
provided  by  the  charter,  in  order  to  know  whether  or  not  the 
time  has  come  when  defendant  must  pay  more  than  seven  per 
cent  upon  its  gross  receipts.  It  is  not  required  to  accept  the 
judgment  of  defendant,  nor  the  judgment  of  the  auditor,  nor 
the  judgment  of  both  of  them.  Whenever  the  defendant  fails 
to  list  its  property  and  take  the  steps  reqmred  of  it  to  determine 
the  amount  of  the  state  tax,  it  violates  its  contract.  When 
this  opinion  is  fairly  considered,  there  is  nothing  in  it  which 
conflicts  with  the  position  we  now  take  or  have  ever  taken. 
And  if  there  was,  it  would  make  no  difference. 

Our  contention  is,  that  while  the  amount  of  the  payment,  de- 
nominated a  tax  in  section  22,  must  he  ascertained  and  determined 
through  the  machinery  of  the  revenue  laws  by  listing  defendant's 
property  and  applying  the  rate  to  its  valuation  as  in  any  other  case, 
the  obligation  to  make  the  payment  grows  out  of  contract  and  does 
not  result  from  the  taxing  power. 

A  tax,  in  the  constitutional  sense,  is  "the  enforced  propor- 
tional contribution  from  persons  and  property  levied  by  the 
state  for  the  support  of  the  government."  The  obligation  to  pay 
the  tax  does  not  arise  out  of  contract,  either  express  or  implied. 
It  is  the  positive  act  of  the  government,  binding  upon  the  citizen, 
regardless  of  either  his  wish  or  consent.  Because  the  tax  is 
exacted  by  law  and  without  his  consent,  the  citizen  has  a  right 
to  insist  that  the  provisions  of  the  law  shall  be  strictly  complied 
with.  These  provisions  cannot  be  waived,  and  any  failure  to 
comply  with  them  deprives  the  taxing  body  of  all  right  either  to 
collect  the  tax  itself  or  any  equivalent  therefor.  Nobody  claims, 
nor  has  ever  claimed,  that  a  bill  will  lie  to  collect  a  tax,  or  a  sub- 
stitute therefor,  under  an  obligation  created  by  the  taxing  power. 
The  obligation  here  was  not  so  created. 

Under  this  charter,  the  state  adopted  an  entirely  different 
plan.  Instead  of  leaving  the  defendant  subject  to  the  general 
revenue  laws  and  its  property  liable  to  taxation  in  the  same 
manner  and  to  the  same  extent  as  the  property  of  other  corpora- 
tions, it  made  an  essentially  different  arrangement.  It  exempted 
the  defendant,  in  express  terms,  from  the  payment  of  all  taxes 


HI 

except  state  taxes.  While  other  corporations,  in  addition  to 
state  taxes,  were  required  to  pay  county,  city,  town,  school 
district  and  other  taxes,  the  defendant  was  relieved  from  all 
such  exactions.  This  relief  was  given  to  the  defendant,  not  by 
law,  but  by  contract.  The  entire  tax  Hability  of  the  defendant 
is,  therefore,  a  contract  liability.  The  charter,  as  to  this  liability, 
cannot  be  treated  by  defendant  as  a  contract  whenever  it  serves 
the  interests  of  defendant  to  treat  it  as  a  contract,  and  as  a  tax 
whenever  it  serves  the  interests  of  defendant  to  treat  it  as  a  tax. 

While  one  of  the  payments  is  called  a  tax,  the  amount  of 
which  is  to  be  ascertained  by  adopting  the  rule  applied  to  the 
ascertainment  of  state  taxes  upon  the  property  of  other  corpora- 
tions, this  does  not  make  the  payment  a  tax  in  the  constitutional 
sense.  The  liability  to  make  the  payment  grows  out  of  the  con- 
tract and  is  not  referable  to  the  taxing  power. 

The  amount  of  the  payment  is  certain,  because  it  can  be  made 
certain.  The  means  provided  to  ascertain  the  amount,  is  the 
machinery  employed  to  levy  a  state  tax.  But  this  does  not 
make  the  amount,  when  ascertained,  a  tax  payment.  It  still 
remains  a  contract  payment. 

That  the  payment  provided  in  section  22,  though  denomi- 
nated a  tax,  is  not  a  tax  in  the  constitutional  sense,  but  simply  a 
payment  due  under  a  contract,  was  demonstrated  by  defendant's 
counsel  in  an  argument  filed  in  this  court  in  support  of  the  motion 
to  dismiss  the  original  bill.  As  heretofore  stated,  the  original 
bill  was  filed  in  this  court  upon  the  theory  that  the  payments 
required  under  the  charter  constituted  revenue,  and  therefore 
this  court  had  original  jurisdiction.  The  original  bill  was  framed 
upon  precisely  the  same  theory  as  the  present  bill,  and  the  same 
relief  is  sought  by  both. 

A  motion  was  made  by  defendant's  counsel  to  dismiss  the 
suit  for  want  of  jurisdiction.  The  sole  ground  relied  on  was  that 
the  word  revenue,  as  used  in  the  jurisdictional  clause,  meant 
taxes,  in  the  sense  of  enforced  obligations;  that  the  payments 
required  under  this  charter  were  not  taxes  in  any  such  sense,  but 
payments  voluntarily  agreed  to  he  made  on  a  contract. 

In  support  of  this  motion,  counsel  filed  in  this  court  a  printed 
brief  and  argument  of  36  pages.  I  shall  close  my  argument 
upon  this  point  by  quoting  from  their  argument.  My  purpose 
is  not  to  embarass  counsel.  I  would  not  do  it  if  I  could,  and  I 
think  they  know  it.  My  purpose  is  not  to  show  that  counsel 
have  changed  front.     They  have  a  right  to  change  front.     Fur- 


112 

thermore,  it  is  no  discredit  to  change  front.  I  use  their  argument 
for  the  simple  reason,  it  is  an  abler  argument  than  I  can  make. 

On  page  6  of  this  brief  and  argument,  counsel  say: 

"It  is  manifest  from  the  bill  itself  that  it  is  neither  founded 
on  a  law  passed  for  the  purpose  of  raising  revenue,  nor  is  it 
brought  to  enforce  the  collection  of  a  tax.  It  is  a  suit  for  an 
accounting  of  payments  voluntarily  agreed  to  be  made  on  a 
contract." 

It  is  idle  to  say  the  language  here  used  referred  only  to  the 
five  per  cent.  Not  only  here,  but  throughout  the  entire  argu- 
ment, they  were  discussing  the  payments  required  by  this  char- 
ter. Everywhere  they  used  the  word  "payments."  One  of  the 
payments  is  that  provided  in  section  22.  Furthermore,  it  was 
necessary  to  show  that  neither  of  these  payments  constituted 
revenue  within  the  meaning  of  the  constitution.  If  either  was 
revenue,  in  a  constitutional  sense,  this  court  had  jurisdiction 
of  a  part  of  the  claims  set  up  in  the  bill,  and,  under  every  rule 
of  law,  would  have  retained  jurisdiction  of  the  entire  bill. 

Their  argument  was,  that  neither  the  obligation  to  pay  the 
five  per  cent,  in  section  18,  nor  the  state  tax,  in  section  22,  grew 
out  of  the  taxing  power,  but  out  of  the  voluntary  contract,  and 
the  relief  sought  was  an  accounting  under  the  contract.  This 
argument  was  sound  then  and  is  sound  now. 

On  page  7,  they  say: 

"This  suit  is  not  brought  to  recover  that  state  tax.  It  is 
not  involved  in  the  present  consideration.  The  only  question 
here  is  whether  this  court  has  jurisdiction  of  a  bill  praying  for 
an  accounting  of  payments  agreed  to  be  made  in  consideration 
of  lands  and  other  grants,  merely  because  the  state  is  a  party  and 
may  derive  money  from  the  suit." 

On  page  20,  they  say: 

"This  is  a  suit  on  a  contract.  The  state,  having  received 
lands  from  congress,  enacted  the  defendant's  charter,  which  the 
incorporators  were  at  liberty  to  accept  or  refuse.  The  charter 
was  accepted  and  thereby  was  consummated  a  contract  volun- 
tarily entered  into  by  the  respective  parties.  This  is  not  an 
attempt  to  collect  a  tax.  The  issue  relates  to  the  amount 
claimed  to  be  due  the  state  under  defendant's  agreement  to  pay 
a  per  centum  of  its  gross  income — payments  agreed  to  be  made  in 
consideration  of  and  for  the  grants  and  privileges  conveyed — 
not  as  taxes,  but,  in  part,  for  exemption  from  taxes.     A  considera- 


113 

tion  so  to  be  paid,  under  a  voluntarily  made  contract,  is  not  a  tax 
nor  'revenue'  as  understood  and  defined  in  this  connection." 

Counsel  thereupon  quote  from  text-writers  and  decisions,  to 
show  that  an  ordinary  tax  is  an  enforced  proportional  contribu- 
tion, and  is  in  no  sense  a  contract,  either  express  or  implied. 

On  page  23,  counsel  say,  in  substance,  the  payment  provided 
in  section  22  is  a  tax,  and  vahiation  and  extension  of  the  proper 
rate  thereon  are  essential  to  its  collection.  If,  by  this  statement,  they 
meant  anything  more  than  that  the  amount  of  the  tax  contracted 
to  be  paid  should  be  determined  and  measured  by  the  revenue 
laws,  it  is  absolutely  at  variance  with  everything  contained  in 
the  twenty -two  preceding  pages  and  finds  no  support  in  the  pages 
which  follow.  Whatever  they  meant  by  this  statement,  their 
argument,  as  a  whole,  is  a  demonstration  that  the  obligation  to 
pay  the  state  tax  is  not  referable  to  the  taxing  power,  but  is 
purely  a  contract  obligation. 

To  sustain  defendant's  contention,  means  to  permit  it  to  violate 
its  own  contract  and  reap  the  benefit  of  its  own  wrong  doing. 

Upon  the  acceptance  of  the  charter,  the  obligations  imposed 
by  sections  18  and  22  became  the  obligations  of  a  contract.  This 
fact  is  now  utterly  ignored  by  defendant's  counsel.  The  con- 
tract obUgations  of  defendant  were:  first,  to  pay  five  per  cent 
of  its  gross  receipts ;  second,  to  Hst  its  property  with  the  auditor 
annually  and  to  pay  the  state  tax  assessed  thereon ;  third,  to  pay 
into  the  treasury  every  year,  in  per  centum  and  taxes,  and  if 
these  together  were  not  sufficient  by  making  up  the  difference,  an 
amount  equal  at  least  to  seven  per  cent  of  its  gross  receipts. 

The  measure  of  performance  fixed  by  this  contract,  until  such 
time  as  the  five  per  cent  and  the  state  tax  should  exceed  it,  was 
seven  per  cent  of  the  gross  receipts.  If  defendant  has  failed  to 
pay  into  the  treasury  five  per  cent  of  its  gross  receipts,  it  has 
violated  its  contract.  This  would  seem  clear.  If  it  has  neglected 
to  list  its  property,  it  has  also  violated  its  contract.  The  duty  to 
list  its  property  and  pay  a  state  tax  was  as  much  a  part  of  its 
contract  obUgation  as  was  the  duty  to  pay  the  five  per  cent.  If 
a  failure  to  do  one  was  a  breach  of  its  contract,  why  not  a  failure 
to  do  the  other? 

The  bill  avers,  and  the  demurrers  admit,  that  during  each 
year,  from  1859  to  1905,  the  defendant  failed  to  list  its  stock, 
property  and  assets  with  the  auditor  for  taxation,  as  reqtdred  by 
section  22.  The  listing  of  this  property  was  essential  to  the  levy 
of  the  tax.     The  charter  required  the  defendant  to  list  it.     When 

(8) 


114 

it  accepted  the  charter,  it  agreed  to  do  so.  Upon  what  theory 
can  defendant  neglect  or  refuse  to  perform  its  own  contract  and 
then  take  advantage  of  the  fact  that  its  contract  was  not  per- 
formed. 

It  is  no  answer  to  say  that  under  the  act  of  1859  it  was  the 
duty  of  the  auditor  to  hst  the  property  in  case  the  defendant 
failed  to  list  it.  One  party  to  a  contract  is  not  excused  from  its 
performance  because  the  law  points  out  a  way  by  which  the  other 
party  may  protect  himself  from  loss.  After  the  act  of  1859  was 
passed,  it  was  as  much  the  duty  of  defendant  to  Hst  its  property 
with  the  auditor  annually  as  it  was  before.  After  the  act  was 
passed,  a  failure  to  list  the  property  was  as  much  a  breach  of 
defendant's  contract  as  it  was  before. 

By  failing  to  Hst  its  property  and  by  paying  into  the  treasury 
seven  per  cent  upon  the  receipts  reported,  it  waived  the  observ- 
ance of  every  requirement  essential  to  the  recovery  of  the  full 
seven  per  cent,  not  only  upon  the  receipts  reported,  but  upon  all 
of  the  receipts.  Any  other  theory  would  permit  the  defendant 
to  reap  a  profit  from  its  own  neglect. 

If  counseVs  contentions  are  correct,  the  failure  of  the  general 
assembly,  in  any  year,  to  provide  for  raising  revenue  by  the  assess- 
ment of  property  and  the  levy  of  a  tax,  would  reduce  the  full  measure 
of  the  charter  obligation  from  seven  per  cent  to  five  per  cent. 

No  system  of  taxation  is  necessarily  permanent.  When  the 
charter  was  granted,  the  assessment  of  real  and  personal  property 
and  the  levy  of  a  tax  thereon  was,  and  has  since  continued  to  be, 
the  method  pursued  of  raising  revenue  to  support  the  state 
government.  But  this  method  may  be  changed.  Whether  or 
not  a  change  is  probable  is  beside  the  question.  The  legislature 
has  power  to  adopt  another  method. 

Section  1  of  article  IX  of  the  constitution,  which  provides  for 
the  levying  of  a  tax  by  valuation,  also  authorizes  an  occupation 
tax.  Under  the  constitution,  the  present  scheme  may  be  aban- 
doned and  the  entire  state  revenue  be  raised  by  an  occupation  tax 
and  without  the  valuation  and  assessment  of  property.  And 
stranger  things  have  occurred.  At  the  last  session  of  the  legis- 
lature, this  very  subject  was  discussed. 

Counsel  tell  us  the  charter  HabiHty  of  defendant  to  pay  more 
than  five  per  cent  of  its  gross  receipts  depends  upon  the  Hsting 
of  its  property  and  the  levying  of  a  state  tax ;  that  the  obHgation 
is  to  pay  five  per  cent  as  such,  a  state  tax  as  such,  and  when  the 
sum  of  these  two  does  not  equal  seven  per  cent  of  the  gross  re- 


115 

ceipts,  to  pay  the  difference  as  such.  They  say,  until  such  state 
tax  is  levied  and  its  amount  ascertained,  there  can  be  no  "differ- 
ence," and  hence  no  payment  of  any  kind  or  character,  above  the 
five  per  cent,  is  required  to  be  made. 

If,  then,  in  lieu  of  the  present  scheme  of  raising  revenue  by 
levying  a  tax  by  valuation,  an  occupation  tax  should  be  adopted, 
under  counsel's  contention,  what  would  be  the  result? 

No  taxes  being  levied  by  valuation,  there  could  be  no  assess- 
ment upon  defendant's  property  and  hence  no  state  tax.  There 
being  no  state  tax,  there  could  be  no  "difference,"  and  there 
being  no  "difference,"  nothing  would  be  due  except  the  five  per 
cent.  And  this  would  be  true,  notwithstanding  the  fact  that  the 
charter  itself  expressly  provides  that  the  whole  amount  paid 
shall  equal  at  least  seven  per  cent  of  the  gross  receipts. 

To  so  construe  this  charter  means  that  the  legislature  can 
change  the  measure  of  defendant's  obligation  from  seven  per 
cent  to  five  per  cent,  and  this  too,  in  spite  of  a  constitutional 
provision  which  declares  that  not  one  iota  of  defendant' s  liability 
to  pay  money  into  the  state  treasury,  under  this  charter,  shall  ever 
he  released  or  suspended,  modified  or  impaired,  by  legislative  or 
other  authority.  We  confidently  believe  that  no  court  will  so 
construe  this  charter. 

Two  per  cent  in  addition  to  the  five  per  cent  of  the  gross  receipts 
can  be  recovered  from  defendant  as  damages  for  the  breach  of  its 
contract. 

Defendant's  position,  in  substance,  is  that  it  has  escaped  its 
contract  liability  to  pay  the  additional  two  per  cent  on  account 
of  its  breach  of  another  contract  liability,  namely,  its  liability 
to  list  its  property  and  pay  a  state  tax.  In  other  words,  the 
defendant  contends  that  if  it  had  listed  its  property,  as  the  charter 
required,  and  then  refused  to  pay  the  additional  two  per  cent, 
the  state  could  have  recovered  all  of  it,  but  since  it  refused  both 
to  list  its  property  and  pay  the  additional  two  per  cent,  the  state 
can  recover  none  of  it.  According  to  its  view,  it  has  exempted 
itself  from  all  liability  for  one  wrong  by  committing  another. 
Under  this  theory,  the  more  charter  obligations  the  defendant 
ignores,  the  less  revenue  the  state  gets. 

As  heretofore  shown,  the  obligation  of  defendant  to  list  its 
property  is  a  contract  obligation.  The  failure  to  list  it  was  a 
breach  of  contract.  If  this  failure,  together  with  the  auditor's 
neglect  to  levy  the  tax,  which  was  due  in  part  to  the  failure  to 
list,  resulted  in  the  non-payment  of  the  additional  two  per  cent, 


116 

an  action  thereby  accrued  to  the  state  to  recover  the  damages 
resulting  therefrom,  and  if  these  damages  can  be  ascertained, 
they  are  recoverable  in  this  suit.  That  these  damages  are  sus- 
ceptible of  ascertainment  is  clear.  They  amount  to  seven  per 
cent  of  the  unreported  receipts.  Though  they  might  amoimt  to 
more,  they  cannot  amount  to  less,  and  since  the  state  is  content 
with  demanding  seven  per  cent,  the  defendant  cannot  be  heard 
to  complain. 

It  matters  not  what  this  two  per  cent  is  called.  Whether 
we  call  it  two  per  cent  of  the  gross  receipts,  representing  taxes 
and  the  difference  between  taxes  and  the  two  per  cent,  or  whether 
we  call  it  damages  for  a  breach  of  the  contract,  the  result  is  pre- 
cisely the  same.  We  are  not  concerned  with  names.  What  is 
wanted  is  the  full  amount  of  money  now  due  the  state.  And  this 
amount  is  seven  per  cent  of  the  gross  receipts  of  the  charter  lines, 
which  defendant  wrongfully  omitted  to  report  and  upon  which 
nothing  whatever  was  paid. 

In  view  of  what  has  already  been  said,  it  is  unnecessary  to 
discuss  the  contentions,  that  the  state,  by  its  bill,  declares 
upon  one  contract  and  seeks  an  accounting  upon  an  entirely 
different  contract;  that  the  state,  by  retaining  the  payments 
made  and  disclaiming  the  right  to  collect  the  tax,  has  waived  the 
demand  it  now  asserts;  that  the  bill  does  not  aver  the  amounts 
received  were  less  than  the  five  per  cent,  or  that  the  state  is 
seeking  to  change  the  character  of  the  contract  obligation  in 
violation  of  the  constitution. 

The  fallacy  of  counsel's  entire  argument  is  demonstrated  by 
the  position  they  take,  and  which  they  are  compelled  to  take, 
respecting  the  years  1905  and  1906.  During  each  of  these  years, 
as  shown  by  the  bill,  the  defendant  listed  its  property  with  the 
auditor,  and  the  auditor  assessed  a  state  tax  thereon.  During 
each  of  these  years,  the  amount  of  the  state  tax  was  less  than  two 
per  cent  of  the  gross  receipts.  During  each  of  these  years,  the 
defendant  paid  into  the  state  treasury  seven  per  cent  upon  the 
gross  receipts  reported  to  the  governor  in  its  semi-annual  state- 
ments. This  seven  per  cent  included  the  state  tax,  five  per  cent 
upon  the  receipts  reported,  and  the  difference  between  the  sum 
of  the  state  tax  and  the  five  per  cent,  and  seven  per  cent  of  the 
receipts  reported.  In  other  words,  the  state  tax  was  paid  for 
each  of  these  years,  and  the  bill  so  avers. 

During  the  years  1905  and  1906  a  large  amount  of  charter 
line  receipts  were  fraudulently  omitted  from  the  semi-annual 


117 

statements,  upon  which  no  per  centum  was  paid.  By  this  bill, 
the  state  is  seeking  to  recover  seven  per  cent  upon  the  receipts 
so  omitted.  Counsel  say,  no  recovery  can  be  had  for  these  years, 
because  the  right  to  collect  the  tax  is  disclaimed  in  the  bill. 

In  the  first  place,  this  disclaimer  amounts  to  nothing  as  to 
any  year.  In  the  second  place,  even  if  it  does,  it  neither  has, 
nor  can  have,  any  application  whatever  to  the  years  1905  and 
1906.  During  each  of  these  years,  the  state  tax  was  paid  and  the 
demurrers  so  admit.  What  does  it  avail  to  disclaim  the  right  to 
collect  a  tax  already  paid  ?  You  might  as  well  disclaim  the  right 
to  serve  a  summons  on  a  dead  man. 

According  to  the  theory'  of  defendant's  counsel,  upon  the 
earnings  omitted  from  the  semi-annual  statements  upon  which 
nothing  whatever  was  paid  to  the  state,  seven  per  cent  cannot 
be  recovered  when  a  state  tax  was  not  assessed,  and  seven  per 
cent  cannot  be  recovered  when  a  state  tax  was  assessed.  Under 
such  a  construction,  this  charter  is  a  rope  of  sand. 

The  last  contention  urged  by  counsel,  namely,  that  on  the 
receipts  reported  in  the  semi-annual  statements  two  per  cent 
more  was  paid  by  defendant  than  the  charter  required,  and  this 
additional  two  per  cent  was  accepted  by  the  state  in  full  satis- 
faction of  all  its  claims  against  charter  line  receipts  not  reported, 
win  ■never  be  sanctioned  by  any  court  until  principles  of  law  long 
ago  aeV.  led  have  been  completely  overturned. 

When  defendant  computed  upon  the  semi-annual  statements 
the  amount  of  seven  per  cent  of  the  gross  receipts,  included  in  the 
statements,  and  paid  into  the  treasury  the  exact  amount  so  com- 
puted, it  intended  to  apply,  and  did  apply,  to  its  liability  under 
section  18,  five  per  cent  of  the  receipts  so  included,  and  to  its 
liability  under  section  22,  two  per  cent  of  the  receipts  so  included. 

Two  per  cent  of  the  receipts  included  in  these  semi-annual 
statements,  having  been  voluntarily  applied  by  defendant  to 
the  payment  of  the  obligation  in  section  22,  the  payment  so 
voluntarily  applied  cannot  be  revoked  nor  applied  to  any  other 
claim.  And  this  is  true,  regardless  of  the  character  of  the  obli- 
gation— whether  it  was  a  tax  or  not,  or  whether  defendant  was 
was  liable  or  not. 

The  doctrine  is  settled  in  this  court  that  "money  voluntarily 
paid,  even  under  a  mistake  of  law,  but  with  full  knowledge  of  all 
the  facts,  can  neither  be  recovered  back  nor  offset  against  a 
claim  sought  to  be  recovered." 

In  Yates  v.  Royal  Insurance  Company,  200  111.,  206,  this 
court,  per  Justice  Boggs,  said: 


118 

"This  court,  in  numerous  cases,  has  declared  that  money 
voluntarily  paid  to  another,  under  a  mistake  of  law,  but  with 
knowledge  of  all  the  facts,  cannot  be  recovered  back." 

It  will  hardly  be  claimed,  even  by  defendant's  counsel,  that 
when  these  semi-annual  payments  were  made,  the  Illinois  Cen- 
tral was  ignorant  of  the  facts. 

If  payments  voluntarily  applied  to  defendant's  obUgation 
under  section  22,  cannot  be  recovered  back,  neither  can  they  be 
offset  against  the  claim  for  a  per  centum  upon  charter  Hne 
receipts  not  included  in  these  semi-annual  statements. 

In  Otis  V.  The  People,  196  111.,  542,  the  plaintiff  in  error 
sought  to  offset  the  amount  of  an  illegal  city  tax,  which  he  had 
voluntarily  paid,  against  the  school  tax  sued  for.  This  court, 
per  Justice  Hand,  said : 

"The  plaintiff  in  error  voluntarily  paid  to  the  county  col- 
lector the  city  tax  with  a  full  knowledge  of  all  the  facts,  and  the 
same  cannot  be  recovered  back  by  him,  neither  can  it  be  offset 
against  the  school  tax  sought  to  be  collected  in  this  proceeding.'" 

In  the  Hght  of  these  decisions,  what  becomes  of  counsel's 
contention  ? 

What  the  state  here  asks  of  defendant  is,  to  pay  into  the 
treasury  seven  per  cent  of  charter  Hne  receipts,  which  were  wholly 
omitted  from  its  account  and  upon  which  the  state  has  never 
received  a  cent.  To  absolve  it  from  payment  because  no  tax 
has  been  assessed,  means  to  disregard  the  proviso  in  section  22, 
reduce  the  measure  of  the  contract  obligation  from  seven  per 
cent  to  five  per  cent,  ignore  the  constitution  of  1870,  revoke  pay- 
ments voluntarily  applied,  and  permit  the  IlHnois  Central  Rail- 
road to  take  advantage  of  its  own  wrong. 

THE  INTERSTATE  COMMERCE  QUESTION. 

The  third  question  presented  by  the  demurrer  to  the  bill  as  a 
whole — and  the  last  which  I  shall  discuss— relates  to  the  question 
of  interstate  commerce.     It  arises  as  follows: 

A  large  part  of  the  receipts  of  the  charter  Hnes  are  now,  and 
for  years  have  been,  derived  from  the  charter  lines'  share  of 
earnings  upon  traffic  moving  between  points  in  IlHnois,  upon  the 
charter  Unes,  and  points  without  the  state.  For  instance,  when 
a  car  of  freight  is  transported  from  Chicago  to  New  Orleans,  since 
a  part  of  the  haul  is  over  the  charter  Hnes  and  a  part  of  the  ser- 
vice is  rendered  by  the  charter  Hnes,  a  part  of  the  earnings  col- 


119 

lected  for  the  service  is  credited  to  the  charter  lines,  and  upon 
the  charter  lines'  part  of  this  earning  seven  per  cent  is  paid  the 
state.  This  has  been  done,  for  fifty  years,  in  every  case  where 
traffic  moved  between  charter  line  stations  and  points  beyond 
the  state. 

The  defendant  now  contends  that  since  all  of  this  traffic 
moves  interstate,  under  the  commerce  clause  of  the  federal  con- 
stitution, it  is  not  required  to  pay  a  per  centum  upon  the  charter 
lines'  share  of  the  receipts  derived  therefrom. 

If  this  contention  is  sound,  it  means  that  the  state  is  entitled 
to  a  per  centum  only  upon  charter  line  receipts  derived  from 
traffic  originating  at  and  destined  to  points  within  the  State  of 
Illinois.  It  means  that  all  the  joint  earnings  in  which  the  state 
has  any  concern  are  the  joint  earnings  of  the  charter  lines  and  the 
Illinois  branches.  It  means,  when  a  car  of  freight  is  hauled  from 
Oilman,  Illinois,  to  Paducah,  Kentucky,  a  distance  of  283  miles 
over  the  charter  lines,  and  43  miles  over  a  non-charter  line,  no 
per  centum  is  due  the  state  on  the  charter  lines'  share  of  the 
joint  earning.  It  means,  the  contract  obligation  of  the  Illinois 
Central,  to  pay  into  the  treasury,  every  year,  at  least  seven  per 
cent  of  the  gross  receipts  derived  from  the  charter  lines — an 
obligation  voluntarily  made  in  consideration  of  lands  granted 
and  privileges  conferred — is  valid  and  binding  only  in  part.  It 
means  that  the  Illinois  Central,  during  half  a  century,  has  wholly 
misunderstood  the  law  and  paid  into  the  treasury,  in  the  way  of 
per  centum,  millions  of  dollars  it  did  not  owe.  It  means  that, 
from  this  time  on,  the  semi-annual  payments  will  be  merely  baga- 
telles.    It  means,  in  the  classical  language  of  Judge  Dickinson: 

"When  this  case  is  over,  the  Illinois  Central,  instead  of 
erecting  upon  the  borders  of  the  state,  at  Cairo  and  Dunleith, 
monuments  to  the  god  Terminus,  will  erect  a  mounment  com- 
memorative of  the  undeplored  memory  of  a  percentage  upon 
the  transportation  of  interstate  commerce,  which  has  gone  into 
a  state  of  innocuous  desuetude.'' 

Counsel  contend,  first,  that  the  words,  "gross  or  total  pro- 
ceeds, receipts  or  income  derived  from  said  road  and  branches," 
contained  in  section  18  of  the  charter,  mean  only  such  proceeds, 
receipts  or  income  as  are  derived  from  traffic  which  originates 
and  terminates  upon  the  charter  lines  or  upon  the  charter  lines 
and  the  Illinois  branches.  Just  why  the  charter  lines'  share  of 
receipts  from  traffic  moving  between  Chicago  and  Springfield 
is  derived  "from  said  road  and  branches,"  and  the  charter  lines* 


120 

share  of  receipts  from  traffic  moving  between  Chicago  and  St. 
Louis  is  not  "derived  from  said  road  and  branches,"  is  not  very- 
clear. 

When  the  traffic  moves  from  Chicago  to  St.  Louis,  a  part  of 
the  haul  is  over  the  charter  lines,  a  part  of  the  service  in  making 
the  haul  is  rendered  by  the  charter  lines,  and  a  part  of  the  re- 
ceipts for  the  haul,  in  honesty,  belongs  to  the  charter  lines.  To 
say,  that  the  charter  lines'  share  of  these  receipts  is  not  "derived 
from  the  charter  lines,"  to  put  it  mildly,  is  not  convincing. 
Counsel's  lack  of  faith  in  this  contention  is  clearly  manifest  from 
the  closing  paragraph  of  their  printed  argument,  on  page  205. 

Their  second  contention  is,  that  if  the  charter  be  construed 
to  require  the  payment  of  a  per  centum  upon  the  charter  lines' 
share  of  gross  receipts  derived  from  traffic  moving  interstate, 
it  amounts  to  a  tax  or  burden  upon  interstate  commerce  or  a 
regulation  thereof,  within  the  meaning  of  section  8  of  article  I 
of  the  federal  constitution,  which  provides  that  the  congress  shall 
have  power  "to  regulate  commerce  with  foreign  nations  and 
among  the  several  states  and  with  the  Indian  tribes." 

To  support  this  contention,  counsel  cite  a  large  number  of 
cases,  commencing  with  The  Passenger  Cases  in  7th  Howard, 
and  ending  with  Galveston  Railroad  Company  v.  Texas,  210 
U.  S.  Every  one  of  these  cases  involved  a  tax  in  some  form  or 
other.  These  cases  are  fully  discussed  in  our  brief  and  I  cannot 
take  time  to  comment  upon  them.  These  cases  hold  that  con- 
gress has  the  exclusive  power  to  regulate  commerce  among  the 
several  states ;  that  no  state  has  the  power  to  pass  any  law,  the 
effect  of  which  is  to  regulate  commerce  between  such  state  and 
any  other  state,  and  any  state  law,  the  effect  of  which  is  to  im- 
pose a  tax  or  burden,  in  any  form,  upon  interstate  commerce, 
amounts  to  a  regulation  thereof  by  the  state,  and  is  therefore 
void.  Under  these  holdings,  counsel  insist,  that  to  the  extent 
defendant's  charter  requires  it  to  pay  seven  per  cent  upon  the 
gross  receipts  derived  from  interstate  traffic,  it  amounts  to  a  tax 
or  burden  upon  interstate  commerce  and  is  a  regulation  thereof. 

The  doctrines  announced  in  the  cases  cited  are  admitted,  but 
that  these  doctrines  have  any  application  whatever  to  defend- 
ant's charter  is  denied. 

What  is  forbidden  by  the  constitution  is  not  every  act  which 
appears  to  be  a  regulation  of  or  burden  upon  interstate  commerce, 
but  what  is  forbidden  is  every  act  of  a  state  done  by  virtue  of  its 
sovereign  power  exercised  without  regard  to  the  consent  of  the  party 


121 

affected,  the  result  of  which  is  to  hinder,  burden  or  regulate  such 
commerce.  In  other  words,  no  state  can  pass  a  law  requiring 
corporations  or  individuals,  without  their  consent  or  against 
their  will,  to  pay  a  tax,  or  submit  to  any  other  burden  upon 
their  earnings  derived  from  or  upon  their  business,  in  so  far  as  it 
relates  to  interstate  commerce.  Any  attempt  to  pass  such  a  law 
is  the  exercise  of  power  which  the  state  does  not  possess  and  its 
law  is  void. 

The  reason  is  plain.  A  state  is  forbidden  to  regulate  com- 
merce between  itself  and  any  other  state.  What  it  cannot  do 
directly,  it  cannot  do  indirectly.  If  a  state  could  tax  the  re- 
ceipts of  a  corporation  or  an  individual,  derived  from  interstate 
commerce,  it  could  make  the  tax  so  onerous  as  to  practically 
destroy  both  the  right  and  the  power  of  such  corporation  or 
individual  to  engage  in  such  commerce.  And  this  is  the  sub- 
stance of  the  reasoning  in  all  the  cases  cited. 

No  case  has  been  cited  and  none  can  be  found  declaring  an 
act  of  a  state  invalid,  as  amounting  to  a  regulation  of  interstate 
commerce,  except  where  the  act  was  a  law  pure  and  simple,  that 
is  to  say,  a  legislative  act,  adopted  and  enforced  without  the  con- 
sent of  the  corporation  or  individual  affected  thereby. 

In  the  Texas  case,  recently  decided  and  relied  on  by  counsel 
with  so  much  assurance,  as  in  all  the  other  cases,  the  act  held 
invalid  was  a  legislative  enactment.  It  was  a  statute  of  Texas 
which  required  all  railroads  to  pay  a  tax,  to  be  measured  by  the 
amount  of  their  gross  receipts,  and  which  expressly  applied  to 
interstate  traffic. 

A  state  occupies  two  positions:  First,  it  occupies  the  posi- 
tion of  a  sovereign,  and  as  such,  enacts  laws  regulating  the  con- 
duct of  and  imposing  burdens  upon  its  citizens  and  other  persons 
within  its  jurisdiction.  Second,  it  occupies  the  position  of  a 
corporate  entity,  having  power  to  own,  possess  and  manage 
property  and  enter  into  contracts  relating  thereto.  As  a  cor- 
porate entity,  it  can  exercise  dominion  over  its  own  property  in 
the  same  manner  and  to  the  same  extent  as  any  other  corpo- 
ration. It  can  sell  it  for  cash  or  on  time  or  lease  it  upon  whatever 
terms  it  pleases.  This  fact  is  entirely  overlooked  by  defendant's 
counsel. 

It  is  plain  this  constitutional  provision  is  not  aimed  at 
contracts  pertaining  to  interstate  commerce,  made  either  by 
individuals  or  corporations.  It  does  not  prohibit  a  corporation 
from  contracting  that,  in  consideration  of  services  rendered  or 


122 

property  conveyed  by  it  to  another  corporation,  the  latter  shall 
pay  a  percentage  upon  gross  receipts  derived  by  it  from  interstate 
commerce.  As  shown  by  the  bill,  in  the  leases  made  by  the  Illi- 
nois Central  with  the  Iowa  lines,  this  very  thing  was  done. 
The  rental  provided  in  these  leases,  in  part  at  least,  was  measured 
by  and  based  upon  the  receipts  derived  from  interstate  traffic. 
For  this  reason  the  leases  were  not  void  and  no  one  has  ever  so 
claimed. 

This  provision  of  the  constitution  has  no  relation  to  voluntary 
contracts.  If  it  had,  no  contract  whatever,  pertaining  to  matters 
within  the  domain  of  interstate  commerce,  could  ever  be  made 
without  the  sanction  of  congress.  If  it  had,  nine- tenths  of  all 
the  leases  now  in  existence  between  railroad  companies  and  their 
subsidiary  lines  would  be  absolutely  void.  If  it  had,  no  corpora- 
tion engaged  in  interstate  commerce  could  argee  upon  a  wage 
scale  with  its  employees  which  would  be  in  force  beyond  a  state 
line. 

This  provision  of  the  constitution  relates  solely  to  the  exercise 
of  a  governmental  power.  Its  purpose  was  not  to  restrict  the 
domain  of  contract,  but  to  vest  in  congress  the  entire  governmental 
power  to  regulate  commerce  among  the  several  states.  Having 
vested  all  of  the  governmental  power  to  regulate  interstate  com- 
merce in  congress,  it  necessarily  follows  that  no  part  of  this 
governmental  power  was  reserved  to  the  states,  and  whenever  a 
state,  in  anyrnanner  or  under  any  pretense,  attempts  to  exercise 
this  governmental  power,  its  act  is  void. 

This  is  the  sole  function  of  this  constitutional  provision. 
Defendant's  counsel,  in  effect,  so  admit.  On  page  146  of  their 
argument,  they  say: 

"The  clause  of  the  federal  constitution  *  *  *  does  not 
apply  to  individuals,  but  to  governmental  powers,  which,  under 
our  system,  are  exercised  by  the  state  and  federal  governments." 

The  decisive  question  then  is,  in  what  capacity  did  the  state 
act  when  it  granted  the  lands  to  the  Illinois  Central  to  build  a 
railroad,  in  consideration  of  the  payment  by  it  of  seven  per  cent 
of  the  gross  receipts  derived  from  said  road?  Did  it  act  as  a 
sovereign,  in  the  exercise  of  a  governmental  power,  or  did  it 
act  as  a  corporate  entity,  in  the  exercise  of  a  contract  right  over 
property  which  it  owned  or  controlled.?  That  it  acted  solely  in 
the  latter  capacity  is  beyond  the  pale  of  legitimate  discussion. 
It  answers  no  purpose  to  theorize  about  it,  because  this  court  has 
repeatedly  decided  it. 


123 

While  the  grant  was  made  through  the  legislature,  in  the 
form  of  a  law,  and  was  called  a  public  law,  it  was  not  a  law  in 
the  sense  of  an  exercise  of  governmental  power,  When  the 
state,  in  its  sovereign  capacity,  enacts  a  law,  it  takes  effect  solely 
by  virtue  of  its  enactment.  The  time  when  the  law  takes  effect 
may  depend  upon  circumstances,  but  whenever  determined  or 
however  determined,  the  law  takes  effect  because  of  the  sovereign 
power  behind  it. 

The  charter  of  defendant  did  not  take  effect  because  of  its 
enactment  by  the  general  assembly.  It  did  not  compel  the 
incorporators  named  in  it  to  organize  themselves  into  the  Illinois 
Central  Railroad  Company,  or  take  the  lands,  or  build  the  road, 
or  pay  into  the  treasury  seven  per  cent  upon  the  gross  receipts. 
After  this  charter  was  adopted  by  the  legislature  and  signed  by 
the  governor,  until  its  acceptance,  it  was  simply  a  business  offer 
made  to  the  thirteen  incorporators  named  in  it  concerning 
property  which  the  state  then  controlled  in  its  corporate  capacity. 
When  the  charter  was  accepted,  it  became  a  contract.  It  is  a 
contract  yet.  As  a  contract,  it  can  never  be  changed  except  by 
the  consent  of  both  contracting  parties,  and  this  court  has  re- 
peatedly so  held.  Since  the  per  centum  due  under  this  charter 
grows  out  of  contract  and  not  out  of  the  exercise  of  any  govern- 
mental power,  this  prohibition  of  the  constitution  has  no  relation 
to  it. 

Furthermore,  the  enforcement  of  this  per  centum  is  in  no 
sense  an  interference  with  or  regulation  of  interstate  commerce. 
The  company  is  not  authorized  to  impose  the  burden  of  this  per 
centum  or  any  part  thereof  upon  passengers  or  shippers.  Under 
the  charter,  it  must  bear  this  burden  itself.  The  payment  of  this 
per  centum  is  no  more  a  tax  or  burden  upon  interstate  commerce 
than  any  other  like  payment  made  to  a  private  corporation 
under  a  similar  contract. 

When  this  suit  was  begun,  the  Illinois  Central  evidently 
concluded  it  would  be  a  good  plan  to  start  a  back  fire.  Without 
much  delay,  it  proceeded  to  do  it  with  the  commerce  clause  of 
the  federal  constitution.     But  it  won't  stop  the  suit. 

Counsel  say,  when  this  question  is  finally  determined,  the 
state's  per  centum  upon  earnings  derived  from  interstate  com- 
merce will  go  into  a  state  of  innocuous  desuetude.  Of  course  it 
may  go  there,  but  the  probability  does  not  disturb  our  sleep. 
Any ,  question  of  law,   affecting  the  financial  interests  of  the 


124 

Illinois  Central,  which  for  thirty  years  has  been  entirely  over- 
looked by  the  legal  department  of  that  company,  is  not  very 
grave. 

In  his  argument  in  the  court  below,  which  was  printed  in 
pamphlet,  Judge  Dickinson  said: 

"Upon  all  these  questions  of  which  the  governors,  who  were 
directors  of  this  railroad  company,  are  presumed  to  have  known, 
every  governor  of  the  State  of  Illinois  back  for  thirty  years  is 
arraigned  and  his  administration  is  smirched  by  this  bill,  and 
you  cannot  make  anything  else  out  of  it.  It  charges  either  that 
they  did  not  know  what  they  ought  to  have  known,  and  thus 
were  guilty  of  neglect,  or  knowing  what  they  ought  to  have 
known  and  not  requiring  an  accounting  for  it,  were  guilty  of 
worse  conduct." 

If  this  argument  is  sound  as  to  state  officials,  it  is  also  sound 
as  to  railroad  officials.  And  I  say  to  Judge  Dickinson,  if  there 
is  any  merit  in  the  contention  now  urged,  your  own  argument 
is  the  severest  arraignment  of  the  ignorance  and  neglect  of  the 
legal  department  of  a  railroad  company  that  was  ever  made  in  a 
court  of  justice. 

For  thirty  3^ears  the  Illinois  Central  has  voluntarily  accounted, 
or  pretended  to  account,  for  seven  per  cent  of  the  charter  lines' 
share  of  all  the  joint  earnings  derived  from  the  carriage  of  inter- 
state commerce. 

During  these  years,  the  records  of  this  court  show  that  the 
legal  affairs  of  the  Illinois  Central  were  directed  by  men  whose 
fame  for  astuteness  and  knowledge  of  law  was  as  wide  as  the 
nation.  Among  these  lawyers  were  B.  F.  Ayer,  Judge  Fentress, 
and  last,  but  by  no  means  least,  Jacob  M.  Dickinson,  of  Ten- 
nessee. 

During  the  eighties,  he  frequently  served,  by  special  commis- 
sion, on  the  supreme  bench  of  that  state.  For  two  years  he  was 
assistant  attorney  general  under  President  Cleveland.  In  1903 
he  was  counsel  for  the  government  before  the  Alaskan  Boundary 
Tribunal.  In  1907  he  was  president  of  the  American  Bar 
Association.  Ten  months  ago,  because  of  his  recognized  legal 
attainments,  President  Taft  made  him  Secretary  of  War. 

For  nearly  ten  years,  Jacob  M.  Dickinson  was  general  counsel 
of  the  Illinois  Central  and  head  of  its  law  department.  During 
this  time,  the  principles  regulating  interstate  commerce  were 
the  same  principles  which  regulate  it  now.     Recent  decisions 


125 

have  not  changed  the  principles,  and  the  courts  so  hold.  During 
this  time,  twice  every  year,  under  the  advice  or  with  the  full 
knowledge  of  its  legal  department,  the  Illinois  Central  voluntarily 
paid,  or  pretended  to  pay,  into  the  state  treasury  seven  per  cent 
on  the  charter  lines'  share  of  all  the  receipts  derived  from  the 
carriage  of  interstate  commerce. 

If  the  objection  now  raised  is  a  valid  objection;  if  no  per 
centum  is  due  the  state  upon  earnings  derived  from  interstate 
traffic;  if  the  commerce  clause  of  the  federal  constitution  applies 
to  this  charter,  the  legal  adviser  of  the  Illinois  Central,  through 
ignorance  of  law  or  neglect  of  duty,  has  cost  the  company  millions 
of  dollars,  and  he  ought  to  pay  it  back.  In  the  language  of 
Judge  Dickinson : 

"Either  he  did  not  know  what  he  ought  to  have  known,  or 
knowing  what  he  ought  to  have  known,  was  guilty  of  worse  con- 
duct." 

Any  contention  which  involves  these  assumptions  does  not 
seriously  alarm  the  state.  We  have  no  fears  that  when  this 
question  is  finally  determined,  the  realm  of  god  "Terminus  " 
will  be  disturbed.  I  shall  not  indulge  in  any  prophecies.  I  will 
not  say,  when  this  suit  is  ended,  any  monuments  will  be  erected 
at  Cairo  and  Dunleith.  But  if  any  monuments  are  erected,  I 
venture  a  guess  that  upon  these  monuments  will  be  written  this 
inscription:  "Sacred  to  the  Memories  of  Bridge  Arbitraries  and 
Constructive  Mileage." 


CONCLUSION. 

Many  of  the  contentions  urged  by  defendant's  counsel  are 
premature.  When  the  bill  is  answered  and  these  contentions 
become  issues,  the  state  will  meet  them.  This  bill  must  be 
tested  by  the  facts  averred  in  it  and  the  reasonable  inferences 
resulting  therefrom.  These  facts  are  admitted  by  the  demurrers. 
They  cannot  be  ignored  in  the  argument  of  the  demurrers. 

In  view  of  the  nature  of  this  contract,  the  fiduciary  relation 
created  by  it,  the  character  of  the  transactions  had  xinder  it, 
the  peculiar  knowledge  possessed  by  defendant  and  the  magni- 
tude of  these  accounts,  we  confidently  believe  the  averments 
of  this  bill  are  amply  sufficient  to  meet  the  requirements  of  every 
rule  of  pleading,  when  reasonably  construed,  as  it  ought  to  be, 
to  promote  justice  and  not  defeat  it. 


126 

I  am  fully  aware  that  this  court  neither  expects  nor  desires 
a  vote  of  thanks  for  discharging  a  duty.  But  I  cannot  conclude 
without  expressing  to  every  member  of  this  court  my  sincere 
appreciation  for  the  earnest  and  patient  attention  with  which 
you  have  listened  to  this  long  and  necessarily  tedious  argument. 


127 


p:xhibit  "1." 


Illinois  Central  System. 


CHARTER  LINES. 

Miles.  Miles. 

Chicago,  111.,  to  Cairo,  111 364.73 

Dunleith,  111.,  to  Branch  Junct.,  Ill 340.77 

Total  mileage  charter  lines 705.50 

NON-CHARTER  LINES. 

Oilman,  III,  to  East  St.  Louis,  111 209.06 

St.  Charles  Air  Line  Junct.,  111.,  to  Freeport,  111 112.14 

East  St.  Louis,  111.,  to  Murphysboro,  111 84.25 

Murphysboro,  111.,  to  Texas  Junct.,  Ill 1.00 

Texas  Junct.,  111.,  to  Carbondale,  111 7.72 

Pekin,  111.,  to  Decatur,  111 67.38 

Hervey  City,  111.,  to  Evansville,  Ind 160.22 

Pinckneyville,  111.,  to  Eldorado,  111 59.85 

Murphysboro,  111.,  to  Carbondale,  111 7.00 

Carbondale,  111.,  to  Brookport,  111 70.64 

Belleville,  111.,  to  E.  Carondelet,  111 17.30 

Carbondale,  111.,  to  Johnston  City,  111 19.15 

Texas  Junct.,  111.,  to  Gale,  111 46.65 

Gale,  111.,  to  Thebes,  111 1.67 

McClures,  111.,  to  E.  Cape  Girardeau,  111 4.18 

Champaign,  111.,  to  Havana,  111 100.58 

White  Heath,  111.,  to  Decatur.  Ill 31.04 

Otto,  111.,  to  Normal  Junct.,  Ill 79.46 

Buckingham,  111.,  to  Tracy,  111 10.00 

Kempton  Junct.,  111.,  to  Kankakee  Junct.,  Ill 41.80 

Reevesville,  111.,  to  Golconda,  111 17.20 

Christopher,  111.,  to  Herrin  Junct.,  Ill 1 1.88 

Mounds,  111.,  to  Olive  Branch,  111 10.49 

Groves,  III,  to  Sand  Ridge,  111 17.26 


128 

Wallace,  111.,  to  Madison,  Wis 61.80 

Cedarville  Junct.,  111.,  to  Dodgeville,  Wis 57.36 

Mounds,  111.,  to  Mound  City,  111 2.87 

Stewartsville,  Ind.,  to  New  Harmony,  Ind 6.33 

West  Lebanon,  Ind.,  to  Le  Roy,  111 74.43 

67th  Street,  Chicago,  111.,  to  South  Chicago,  111 4.76 

Blue  Island  Junct.,  111.,  to  Blue  Island,  111 3.96 

Kosciusko,  Miss.,  to  Aberdeen,  Miss 87.89 

Winfield,  Ala.,  to  Brilliant,  Ala 7.84 

E.  Cairo,  Ky.,  to  New  Orleans,  La 547.71 

E.  Cairo,  Ky.,  to  Paducah,  Ky 31.89 

Aberdeen  Junct.,  Miss.,  to  Kosciusko,  Miss 18.37 

Grenada,  Miss.,  to  Memphis,  Tenn 100.00 

Louisville,  Ky.,  to  Memphis,  Tenn 392.21 

Cecelia,  Ky.,  to  Hodgenville,  Ky 17.10 

Horse  Branch,  Ky.,  to  Owensboro,  Ky 42.16 

Evansville,  Ind.,  to  Princeton,  Ky 99.84 

Gracey,  Ky.,  to  Hopkinsville,  Ky - 10.06 

Morganfield,  Ky.,  to  Uniontown,  Ky 6.43 

De  Koven,  Ky.,  to  Ohio  River,  Ky 1.46 

Blackford,  Ky.,  to  Dixon,  Ky 18.40 

Dubuque,  la.,  to  Sioux  City,  la 326.26 

Manchester,  la.,  to  Cedar  Rapids,  la 41.85 

Onawa,  la.,  to  Sioux  Falls,  S.  D 155.58 

Tara,  la.,  to  Council  Bluffs,  la 133.38 

Cedar  Falls  Junct.,  la.,  to  Glenville  Junct.,  Minn 94.88 

Stacyville  Junct.,  la.,  to  Stacy  villa,  la 7.93 

Hervey  City,  111.,  to  Decatur,  111.,  (i  interest) 7.52 

Hopkinsville,  Ky.,  to  Nashville,  Tenn 84.64 

TRACKAGE   RIGHTS. 

Pekin,  111.,  to  Peoria,  111 9.21 

OHve  Branch,  111.,  to  Thebes,  111 9.34 

Total  miles  operated 4,377.44 


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